Credit Glossary

Acceleration Clause - Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire balance of the loan should you default on you loan. Failure to pay on a loan allows lenders to speed up the loan due date or require instant payment of the entire loan balance.

Amortization - The repayment of a loan or debt in regular payments. Each payment is split into a primary repayment and an interest fee. The loan or debt refunded in regular payments. Payments are split into primary repayment and an interest fee.

Asset - Property and possessions that can be used to secure a debt. The entire property owned by a person that can be used to settle debts.

Balloon Payment - A large final payment due at the end of a loan or lease. (Allows a lower monthly payment. A final loan payment that is significantly larger than the payments preceding it.

Collateral - The pledge of a valuable item, like a home or car, to guarantee repayment of a loan. Property accepted as security to assure repayment for a loan.

Compound Interest - Interest payable on income and its accumulated interest. On the contrary, simple interest which is paid only on the principal. Interest totaled on the accumulated unpaid interest as well as on the original principal.

Consolidation - The joining or combining of two or more loans into one easy and manageable loan.

Consumer Credit - A loan to an individual to purchase goods and/or services for personal, family or household use. A loan granted to a consumer permitting the purchase of goods or services for personal, family, or household use.

Cosigner - A credit-worthy person, other than the borrower, who agrees to repay the debt if the borrower fails to do so. A person with good credit agrees to sign jointly or endorse a loan for someone with poor credit.

Credit - An arrangement that allows a person to receive cash goods or services now and pay for them in the future. An arrangement for delayed payment of a loan or purchase, allowing a person to receive goods now and pay for them later.

Credit Profile - A picture of how you (as an individual) paid back the companies you have borrowed money from, or how you have met other financial obligations. A summary of what a person has borrowed in the past and how financial obligations have been met.

Depreciation - The decline in value of an asset over a period of time. A decrease in price or value of an asset over time.

EMI - A fixed payment made monthly, known as Equated Monthly Installments. Equated Monthly Installments, which is a monthly fixed payment.

Lease - Contract by which the owner of property allows another to use it for a specified time, usually in return for payment. A contract granting the use of property during a specific time in exchange for a specific rent.

Lending Rate - The interest charged by the financier on the amount financed. Interest charged to the amount financed by the payee.

Loan Tenure - The time duration for which a loan has been provided. A period of time during which a loan is granted.

Margin Money - Financiers do not fund the full value of the asset. They expect the customer to bring a certain % of the asset as margin. This is called Margin Money. Customers are expected to provide a certain percent of the asset as margin, considered Margin Money, when the financiers do not fund the full value.

Principal - The capital sum as different from interest or income. The sum of money owed as a debt, upon which interest is then calculated.

Risk - Chance or danger of a loss of capital and or interest in financial transaction. The danger or probability of loss in capital and/or interest of a financial debt.

Stamp Duty - Government levy a duty on certain legal documents and financial contracts. The government provides evidence that the duty or financial obligation is levied.

Standing Instructions - Instructions to a bank to debit a fixed amount from your account and pay your financier. Instructions for a bank to withdraw a fixed amount from a persons account to pay the financier.

Statutory Charges - These are charges like stamp duty, sales tax etc which are imposed by the government. Charges the government requires to a duty or financial obligation.