Wednesday, March 26, 2008

Frequently Used Debt Terms (E-I)

Here is an organized list of debt terms you would find that are most commonly used in the industry.


Electronic Fund Transfer (EFT) Systems: This is the most popular way of financial transaction in the modern times. This is a electronic way of transferring funds with the use of credit cards or online payment systems, which does not have the hassle of payment through checks.

Earnest Money: This is the initial deposit made by a buyer during the purchase of a particular property. This is in evidence of a trust and good will when the purchase agreement is finalized.

Equal Credit Opportunity Act (ECOA): The Federal law of America ensures that every citizen of the country is entitled to the ECOA. The law ensures that the creditors practice no discrimination in the credit process based on age, race, color, creed, sex, religion, nationality, marital status or a candidate who earns from public assistance programs.

Equifax: This is one of the most renowned and remarkable amongst the three credit bureaus operating in the US. The other two are Experian and Transunion.

Equity: The difference between the market value of a property and the claims held against it.

Escrow: A written agreement (or property or money) delivered to a third party or put in trust by one party to a contract to be returned after fulfillment of some condition. The conditions are stated in the written agreement.

Estimated Closing Fees:
An estimate of the fees which is paid by the buyer or the seller on before the closing date for service taxes and other important items required to obtain the mortgage. These fees generally average between 2% and 5% of the loan amount.

Experian: One of the largest credit bureaus operating in the United States. The other two are Equifax and Transunion.


Finance Charge: This is calculated on the total amount of dollars which the credit is equivalent to.

Fair Debt Collection Practices Act (FDCPA): This act ensures that the creditors maintain a set of guidelines during debt collection. This law is basically implemented to maintain peace and justice during debt collection and mostly to protect the debtor?s from the harassing behavior of the creditors.

Fair, Isaac and Co:
The Company who is the inventor of the credit-scoring software.

Fee Simple: A fee without limitation to any class of heirs; they can sell it or give it away. The total or absolute ownership of real property.

FICO: Also known as the Fair, Isaac score, FICO is the most popular and well-known credit-scoring process used by the creditors. Your FICO can range from 200 to 900. Any FICO score above 720 can be termed as a good one and any score below 550 needs major attention. According to this system, the more your FICO score raises the better your prospects are to get approved for a loan.

Fixed Rate:
A constant interest rate that remains unchanged during the term of loan.

Fixed-Rate Loans:
Fixed-rate loans have interest rates that do not change over the life of the loan. As a result, monthly payments for principal and interest are also fixed for the life of the loan. Fixed-rate loans typically have 15-year or 30-year terms. With a fixed-rate loan, you will have predictable monthly mortgage payments for as long as you have the loan.

Float: The time interval between the deposit of a check in a bank and its payment.

Fees: A fixed charge for a privilege or for professional services. It includes various different expenses from set up to annual charges.

Financial future:
This term has a vast significance in your life. Your financial future is highly dependent on how you handle your financial transactions today. A healthy amount of savings will make your future secured financially. You might have to follow a strict budget and plan your purchases very carefully today but that will build you a strong financial future ahead.

Fixed APR:
An annual percentage rate that does not change over a given period of time. Some APRs are variable, which means that they change or fluctuate.

Flexible payments:
This means that you have the convenience of making variable payments to a company every month according to your convenience. You do not have to abide by a strict payment amount but can be flexible based on your financial strength that month.


Garnishment: A court order to an employer to withhold all or part of an employee’s wages and to send the money to the court or to the person who won a lawsuit against the employee. This is a court-ordered process that takes property from a person to satisfy a debt.

Gross Monthly Income:
The salary which an individual earns per month, before any taxes or expenses are deducted.

Gross Salary: The entire amount of salary earned before taxes and other deductions are made. The gross salary is different from the net salary or the take home pay, which is the amount of salary after taxes and other deductions are made. The gross and net salary is a major consideration on the amount of loan an individual can be granted.

Goals: This is a reference to a financial goal, which relates regarding the goals you have set for your life and the ways and means to achieve the mark. A goal is an aspiration and target that one desires to achieve someday.

Gold card: A premium card, the Gold card offers those with great credit ratings a much higher limit than your every day credit card. For e.g. if an average credit card limit is $2000 the average Gold card limit is likely to be $6000.

Grace period: A time period when a lender will give you as a grace during which you are not charged interests and need not make payments.

Guarantee: This term means to be assured that something will come through, whether you get a low interest guarantee or a guaranteed approval.


Hazard Insurance: In case there is a loss due to fire or natural calamity an individual is assured protection. This is done in exchange for a premium which is paid to the insurer.

Home Equity Line of Credit:
This is a credit line which is fixed once your home loans are paid in full. This has got a high credit limit which an individual can take loan from as and when required. It is somewhat similar to a credit card.


Interest free: As the name suggests, there will be no interest rates charged for any financial transaction. But obviously there would be some terms and conditions.

Introductory interest rates: In order to give you an attractive deal many companies waive off or lower your introductory interest rates. However after a period of time these low rates might change and you might have to pay high rates like other companies charge you. The only positive side to it is that, you might be offered a low interest rate in your balance transfer and save some money in the interest which you are paying.

Impound Account: This is also known as an Escrow Account. The lender hold reins to this account where the borrower pays the monthly mortgage installments for overall annual expenditure. This may include the taxes and insurance. The lender passes over the money of this account when they have matured.

Initial Rate: The amount charged on a lender during the first phase of an ARM (Adjustable Rate Mortgage) loan.

The additional fee a lender charges on the original loan amount for allowing the borrower to use his funds for a given time period.

Interest Rate:
The amount of money a lender charges a borrower for lending giving him the financial support. The rate is calculated by dividing the total amount of interest charged by the loan amount.

Interest Rate Cap:
This is implemented to safeguard Consumer rights that, limit the amount of the interest rate on an ARM loan. This can however change in an adjustment within an interval or during the entire period of loan.

Interest Rate Disclosure: A complete evaluation of the terms and conditions applicable to the processing of a loan and also the description of the interest rate agreement.

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