Glossary of Loan Terminology


ABA routing number

A series of numbers located at the bottom of an account holder’s checks or deposit slips. These numbers identify a particular account at a financial institution.


Every form of property owned by a debtor.





Automated Clearing House (ACH)

ACH securely and efficiently transfers funds electronically through participating financial institutions.


balance sheet


basis point


before-tax income

Income before taxes are deducted.






A violation of any legal obligation.





An item of value that guarantees payment of debt or may be collected in place of payment.

collection agency

A third party agency creditors use to collect debt. Sometimes a collection agency is a company set up by the creditor to collect debt. Also called a Credit Agency.

consumer report

Also called a “credit report,” a factual record of an individual’s credit payment history. Its main purpose is to help a lender quickly and objectively decide whether to give the consumer credit. A credit report is used to develop a credit score, but does not contain the score itself.


A person who officially undertakes responsibility for a loan in the event of the borrower’s default.

credit agency

A third party agency creditors use to collect debt. Sometimes a credit agency is a company set up by the creditor to collect debt. Also called a Collection Agency.

credit bureaus

Private, for-profit companies that gather information about a consumer’s credit history and sell it to banks, credit card companies, landlords, employers, and other interested parties.

credit counseling service

Companies that provide debt management plans and budget counseling, usually in return for fees.


A person or business who extends credit and to whom money is owed.

capital improvement


certificate of deposit

Commonly known as a “CD,” certificates of deposit bear a maturity date and a specified rate of interest. Penalties may apply for early withdrawal.

credit score

Credit scores provide a numerical representation of a consumer’s credit at a given point in time. Credit scores are calculated using data contained in a consumer’s credit report. The score assesses the likelihood that a borrower will repay a loan or credit card

certificate of title

A statement provided by an abstract company, title company, or attorney stating that the current owner legally holds the title to real estate.

chain of title


clear title


closing cost item






credit history


credit report


credit repository



debt load

The total amount of money the consumer owes.

debt management plan

A plan that helps consumers repay their debts and helps creditors collect the money owed them. Usually put together by a Credit Counseling Agency.

debt collector



Occurs when a borrower fails to repay a debt obligation in accordance with its terms.


An amount owed to another.






electronic funds transfer (EFT)




Equal Credit Opportunity Act (ECOA)



Fair Credit Reporting Act


FDIC insured

The Federal Deposit Insurance Corporation (FDIC) insures the total balances up to the maximum allowed by law.


home equity line of credit


home equity loan




The percentage a creditor charges on money borrowed.



An arrangement whereby a creditor gives a company or an individual money and arranges for them to pay it back on a timeline, usually with interest.







origination fee

A fee imposed by a lender to cover certain processing expenses in connection with making a loan. Usually a percentage of the amount loaned.



When taking out a loan, it refers to the amount of debt, not including interest.


qualifying ratios





rate cap


rate lock-in



secured debt

Debts linked to collateral. The collateral guarantees payment of the debt, or the creditor has a right to take the collateral.



This term refers to the period of time that covers the life of a loan.

total debt ratio


Truth in Lending Act



unsecured debt

Debts with no collateral. Commonly used with credit cards, doctors’ bills, student loans, personal loans or rent.


variable rate

An interest rate that may change once an account opens.