Financial Terms Glossary
A retirement savings plan sponsored by an employer that allows employees to invest a portion of their paycheck before taxes are taken out.
A tax-advantaged savings plan designed to encourage saving for future education costs.
A mortgage with an interest rate that adjusts periodically based on the performance of a specific index.
The process of spreading out a loan into a series of fixed payments over time.
A yearly charge by banks and financial institutions to maintain your account and credit line.
The annual rate charged for borrowing or earned through an investment, which represents the actual yearly cost of funds over the term of a loan.
The effective annual rate of return taking into account the effect of compounding interest.
A financial product that pays out a fixed stream of payments to an individual, primarily used as an income stream for retirees.
Any resource owned by an individual or corporation that is expected to produce positive economic value.
An investment strategy that aims to balance risk and reward by apportioning a portfolio's assets according to an individual's goals, risk tolerance, and investment horizon.
A loan used to purchase a vehicle, typically secured by the vehicle itself.
An electronic banking outlet that allows customers to complete basic transactions without the aid of a branch representative or teller.
The amount of money in a financial repository, such as a checking account, at any given moment.
A request to check the current funds available in an account.
The act of transferring debt from one credit card to another, usually to take advantage of a lower interest rate.
A legal proceeding involving a person or business that is unable to repay outstanding debts.
The release of a debtor from personal liability for certain types of debts after a bankruptcy proceeding, effectively giving them a "fresh start".
A person who derives advantage from something, especially a trust, will, or life insurance policy.
A service offered by banks and other financial institutions allowing customers to pay bills electronically from their accounts.
A fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a fixed interest rate.
A certificate of deposit that is purchased through a financial intermediary instead of directly from a bank.
A service provided by most credit card and charge card issuers, allowing cardholders to withdraw cash up to a certain limit.
A check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier.
A savings certificate with a fixed maturity date and specified fixed interest rate that can be issued in any denomination aside from minimum investment requirements.
A declaration by a creditor that an amount of debt is unlikely to be collected, indicating that it is considered a bad debt.
A deposit account held at a financial institution that allows withdrawals and deposits, accessible via checks, automated teller machines, and electronic debits.
An account that has been closed either by the customer or the bank, no longer allowing transactions.
Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
A loan that is secured by collateral, typically assets that the lender can seize if the loan goes unpaid.
Interest calculated on the initial principal, which also includes all of the accumulated interest from previous periods on a deposit or loan.
The frequency at which interest is added to the principal balance of a financial instrument.
A type of credit granted to consumers to fund specific types of expenditures, which may not be related to a home mortgage or business.
A person who signs an official document (such as a loan agreement) alongside the primary signee, promising to take on the financial obligations if the primary borrower defaults.
A loan designed to help individuals build credit, typically secured by the loan amount held in a bank account while payments are made.
A card issued by a financial company giving the holder an option to borrow funds, usually at point of sale, with interest charged if not repaid in a full monthly payment.
A service that provides guidance on consumer credit, budgeting, and debt management, often from a nonprofit organization.
A security measure to restrict access to an individual’s credit report, which can prevent thieves from opening new accounts in their name.
A record of a consumer’s ability to repay debts and demonstrated responsibility in managing credit.
The maximum amount of credit that a financial institution or other lender will extend to a debtor for a particular line of credit.
An arrangement between a financial institution and a customer that establishes a maximum loan balance that the lender permits the borrower to access or maintain.
A detailed breakdown of an individual's credit history prepared by a credit bureau.
A numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual.
A member-owned financial cooperative, controlled by its members and operated for the purpose of promoting thrift, providing credit at competitive rates, and providing other financial services to its members.
The status of being a member of a credit union, which is typically required to access the financial services offered.
A payment card that deducts money directly from a consumer’s checking account to pay for a purchase.
The act of combining several loans or liabilities into one loan.
A structured payment plan set up by a credit counselor or debt management company for a debtor to pay off debts.
A financial ratio that compares a company’s total debt to its total assets, giving investors and creditors an idea of the financial structure of the company.
A personal finance measure that compares an individual’s total debt to their overall income.
Failure to meet the legal obligations (or conditions) of a loan.
A term used to describe a borrower's failure to make loan payments on time.
An electronic payment from one bank account to another, commonly used for payroll or benefit payments.
A loan made directly by a lender to a borrower, without the use of third parties.
A disagreement or argument about something important, often seen in the context of credit reporting inaccuracies.
A payment made by a corporation to its shareholders, usually as a distribution of profits.
The amount of dividend payment expressed as a dollar amount per share of stock owned.
A written order signed by one party (the drawer) instructing another party (the drawee) to pay a specified sum to a third party (the payee).
Taking funds out of a financial account or investment plan before the agreed-upon withdrawal date, often incurring penalties.
A penalty incurred for withdrawing funds from an investment earlier than is stipulated in the contract.
A system of transferring money from one bank account directly to another without any paper money changing hands.
A bank account with funds set aside to cover large, unexpected expenses, such as an unforeseen medical bill or home repair.
One of the three major credit reporting agencies in the United States, which collects and aggregates information on over 800 million individual consumers and more than 88 million businesses worldwide.
The value of an ownership interest in property, including shareholders' equity in a corporation.
A loan in which the borrower uses the equity of their home as collateral.
A financial arrangement where a third party holds and regulates payment of the funds required for two parties involved in a given transaction.
An electronic signature, which provides a legal way to obtain consent or approval on electronic documents or forms.
One of the three major credit reporting agencies, which collects and reports information about the credit history of individuals and businesses.
A United States government corporation providing deposit insurance to depositors in U.S. commercial banks and savings institutions.
The central banking system of the United States, which regulates the U.S. monetary and financial system.
A type of credit score created by the Fair Isaac Corporation used by lenders to help assess an individual’s credit risk.
A fee representing the cost of credit, or the cost of borrowing, which is included in most consumer credit agreements.
A professional who helps individuals manage their finances by providing advice on money issues such as investments, insurance, mortgages, college savings, estate planning, taxes, and retirement, depending on the client's needs.
An interest rate that does not change over the life of the loan or investment.
A home loan that has a fixed interest rate for the entire term of the loan.
The legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of the mortgaged asset and selling it.
The sequence of legal steps a lender takes to enforce the right to sell a property to recover an unpaid loan.
A notice placed on a credit report that alerts credit companies to verify the identity before extending credit in the name of the person who has set the alert to prevent fraud.
A legal process whereby payments towards a debt owed by an individual can be paid by a third party - which holds money or property that is due to the individual - directly to the creditor.
The total income from all sources before deductions, taxes, and expenses.
A person or entity that agrees to be responsible for another's debt or performance under a contract, if the obligated party does not perform.
A line of credit secured by the equity in a homeowner's primary residence, available for use when needed.
A type of loan in which the borrower uses the equity of their home as collateral. It is sometimes called a second mortgage.
A loan used to finance home renovations and repairs, often secured by the equity in the home.
The fraudulent acquisition and use of a person’s private identifying information, usually for financial gain.
The rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling.
A loan that is repaid with regularly scheduled payments, or installments. Each payment includes a portion of the principal and a portion of the interest.
The amount of money an individual or business pays for an insurance policy.
The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
A payment option that allows a borrower to pay only the interest due on a loan for a specified time, usually the beginning of the loan term.
The act of allocating resources, usually money, with the expectation of generating an income or profit.
A tax-advantaged investing tool that individuals use to earmark funds for retirement savings.
The process of transferring funds from a retirement account into a traditional IRA or a Roth IRA, often without incurring tax penalties.
A bank or brokerage account that is shared between two or more individuals who all have the right to contribute funds, withdraw money, and manage the account.
Credit extended to two or more persons based on their combined financial status and credit histories.
A charge a borrower incurs when a payment is not received on or before the due date.
A fee charged for a payment that is made after its due date.
A contract by which one party conveys land, property, services, etc., to another for a specified time, usually in return for a periodic payment.
The minimum reserves that must be held by a financial institution, not to be used for investments or lending.
An organization or person that lends money.
A right to keep possession of property belonging to another person until a debt owed by that person is discharged.
An arrangement between a financial institution and a customer that establishes the maximum loan amount the customer can borrow.
Assets in the form of cash or which can quickly be converted to cash.
The ease with which an asset, or security, can be converted into ready cash without affecting its market price.
A contract between a borrower and a lender outlining the terms and conditions of the loan.
A change made to the terms of an existing loan by a lender as a response to a borrower's long-term inability to repay the loan.
A representative of a bank, credit union, or other financial institution who assists and advises on the application for loans.
The amount of money that is loaned and must be repaid, not including the interest.
The duration of time over which a loan agreement is in force, and before or at the end of which the loan should either be repaid or renegotiated for another term.
The time period during which a loan's interest rate or loan terms cannot be changed, often associated with mortgage loans.
The current value at which an asset or service can be bought or sold in a marketplace.
The date on which the principal amount of a bond, draft, loan, or other financial instrument becomes due and is to be paid off.
An employee of a credit union who assists members with their accounts and other financial services.
The lowest amount of money that a customer must have in an account to qualify for some service, benefit, or to avoid a fee.
A type of savings account that usually earns a higher amount of interest than a regular savings account.
A printed order for payment of a specified sum, issued by a bank or post office.
A loan secured by the collateral of specified real estate property that the borrower is obliged to pay back with a predetermined set of payments.
An individual or company that is in the business of brokering mortgage loans for individuals or businesses.
A policy that compensates lenders or investors for losses due to the default of a mortgage loan.
The federal agency that charters and supervises federal credit unions and insures savings in federal and most state-chartered credit unions.
An increase in the principal balance of a loan caused by making payments that fail to cover the interest due.
The difference between the assets and liabilities of an individual or company.
A term used when an account does not have enough money to cover a check or electronic withdrawal.
A service provided by a notary public to authenticate documents, administer oaths, and perform other administrative functions.
Banking activities that can be performed over the internet, including transactions, payments, and account management.
A deficit in a bank account caused by drawing more money than the account holds.
A fee charged when a withdrawal from an individual's bank account exceeds the available balance.
A banking service that covers checks or other withdrawals from an account, even if sufficient funds are not available, to prevent an overdraft.
Person-to-person payment services that allow individuals to send and receive money electronically.
A loan that offers a lower-cost alternative to traditional payday loans, offered by credit unions.
The date by which a payment must be made on an account, loan, or credit card.
The total amount that must be paid to completely satisfy the terms of a loan agreement.
An unsecured loan borrowed from a bank, credit union, or online lender that can be used for any purpose.
A collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including mutual funds and ETFs.
A lender’s conditional agreement to lend a specific amount under certain terms in advance of a purchase.
The repayment of a loan before it is technically due, often incurring no penalty.
A fee charged to a borrower who pays off a loan before its due date.
The interest rate that commercial banks charge their most credit-worthy customers.
The amount of money originally loaned, which must be repaid apart from any interest or fees.
The outstanding balance of principal on a loan, excluding interest and fees.
A statement that discloses a company's practices regarding the collection and sharing of customer data.
A legal document that outlines how a company handles and protects personal information gathered from its customers.
A financial instrument that contains a written promise by one party to pay another party a definite sum of money either on demand or at a specified future date.
The process of ensuring that two sets of records (usually the balances of two accounts) are in agreement.
Automatic transfers scheduled to occur on a regular basis, such as monthly or weekly.
To exchange something, such as bonds or coupons, for money or goods.
The process of replacing an existing loan with a new loan, typically with better terms.
A charge assessed by a lender to process a new loan used to pay off an existing loan.
A federal regulation that limits the number of transfers and withdrawals from certain types of bank accounts.
The process by which a creditor legally takes possession of property because the borrower has failed to keep up with payment obligations.
The minimum amount of reserves a bank must hold against deposits, as mandated by regulations.
A type of credit that does not have a fixed number of payments, such as credit card debt.
The exposure to potential financial loss or gain, often evaluated in terms of probability and severity.
A type of IRA where contributions are taxed, but withdrawals during retirement are tax-free.
A nine-digit number used by banks to identify specific financial institutions within the United States.
A secured box located within a bank that customers can rent to store valuable items or documents.
A legal process in which a portion of an employee's earnings is withheld by an employer for the payment of a debt.
A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.
A government bond that offers a fixed rate of interest over a fixed period of time.
A loan backed by collateral, reducing the risk faced by the lender.
A financial asset, such as stocks or bonds, that can be traded in the financial market.
A fee collected to pay for services related to the primary product or service being purchased.
A form of authentication issued by banks and other financial institutions to prevent fraud in the transfer of securities.
A type of unsecured loan that is backed only by the borrower's creditworthiness, rather than by any type of collateral.
A program offered by financial institutions allowing consumers to skip or defer a monthly payment without a credit penalty.
A record provided by a bank or financial institution, detailing the transactions, fees, and balances associated with an account.
An order given to a bank to halt the payment or processing of a check, typically because it has been lost or stolen.
A type of loan designed to help students pay for post-secondary education and the associated fees, such as tuition, books and supplies, and living expenses.
A loan offered to individuals who do not qualify for prime rate loans, typically because of a low credit score or other risk factors.
A loan on which the government pays the interest while the borrower is in school, during the grace period, and during any deferment periods.
Refers to investments on which applicable taxes are paid at a future date, allowing earnings to be reinvested and grow tax-free in the interim.
Income or transactions that are free from tax at the federal, state, or local level.
A deposit held at a financial institution that has a fixed term and usually earns higher interest than a standard savings account.
A loan from a bank for a specific amount with a specified repayment schedule and a fixed or floating interest rate.
A legal document evidencing a person's legal right to ownership of a property.
The total amount of income earned over a year before any deductions are made.
The sum of all interest payments made on a loan over a certain period of time.
An agreement between a buyer and a seller to exchange goods, services, or financial instruments.
A charge assessed for transferring an asset or servicing a loan from one party to another.
One of the three major consumer credit reporting agencies, which provides credit information and services to potential creditors.
A federal law designed to promote informed use of consumer credit by requiring disclosures about its terms and cost.
The process by which lenders and insurers evaluate the risks associated with a potential borrower or insured and establish the terms of a loan or insurance policy.
A loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral.
A loan for which the borrower is fully responsible for paying the interest, regardless of the loan status.
The illegal action or practice of lending money at unreasonably high rates of interest.
An interest rate that can change, based on changes in a corresponding financial index that's associated with the loan.
A loan to purchase a new or used car.
The process by which an employee accrues non-forfeitable rights over employer contributions made to the employee's retirement plan account or pension plan.
A payment made by a debtor that is not required by a legal obligation.
An electronic transfer of funds across a network administered by hundreds of banks around the world.
A limit on the amount of money that can be withdrawn from an account within a given time frame.
The income return on an investment, such as the interest or dividends received from holding a particular security.
A digital payments network that allows customers to transfer money online.
When a bank account has no funds available.
A bond that does not pay periodic interest, instead being sold at a discount to its redemption value.
Old debt that is past the statute of limitations or is no longer owed and has been sold to a collection agency to try to collect on it.