Wednesday, March 26, 2008

Frequently Used Debt Terms (J-P)

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


Joint Account: A formal contractual relationship held by two or more individuals established to provide for regular banking or brokerage or business services. These account holders have the legal responsibility to repay the loans for all financial transaction done through this account.

Joint Liability: The liability shared among two or more individuals, who are responsible for the complete amount of debt incurred.

Joint Tenancy: An ownership of property given to each individual with equal claim in the property, including rights of survivorship.


Late Payment: A payment made after the due date which is made in a credit contract due to which additional charges will be imposed.

Liability on an Account: The total legal obligation to repay debt.

Late Charge: The additional charges paid by a borrower as a penalty, due to a late payment.

Lender: It can be an individual, the bank, any financial institution or mortgage broker offering the loan.

Liability: This means you are completely responsible for any financial transaction done through a card of which you are in charge of. Sometimes credit card companies may state that they are not responsible or liable if your card is misplaced, which means that they are not liable.

Lender Fees: This is the amount of money a debtor has to pay a lender as fees.

Lender Processing Fee: This fee is given for an analysis of your loan application along with the compilation of the necessary supporting documentation to close the loan.

Lien: The right to take another’s property if an obligation is not discharged.

Loan Application: An initial statement of personal and financial information required to apply for a loan.

Loan Application Fee: The lender charges this fee for the costs incurred due to the processing of loan application. This also covers the cost of obtaining a credit report, a property appraisal and the closing costs of a loan.

Loan Consolidation: The consolidation of multiple loans into one loan amount.

Loan Origination Fee:
The fees a lender charges from a borrower to meet the administrative costs while a loan is being processed.

Loan Term: The time span between the closing date of the loan and the date of your last payment.

Lock or Lock-In: A lender’s guarantee of an interest rate for a set period of time-usually between loan application approval and loan closing. The lock-in protects you against increased rate during that time.


No credit: This refers to people with a clean credit report who did not owe any credit balance in the past. The individual must have paid off the credit with the help of a loan or credit cards.

No hassles: A dialogue or a sales pitch that assures consumers that the individual will be rendered the best quality service.

Negative Amortization: When a loan payment schedule does not meet up the full amount of interest due the principal amount increases. This is called negative amortization. The monthly amount which is less is added to the principal amount of the loan.

Notice of Default: This is a written documentation send to a borrower or a debtor if there is any failure in payment on his part or if he has gone against any company policy. Through this notice the borrower is intimidated that a legal action may be taken against him.


Offer Expires: This is the date of expiry of credit card validity. Even after the expiry date a consumer may enjoy certain rights which the credit card company allows him to.

Overdraft Checking:
A line of credit that allows you to write checks or draw funds by means of an EFT card for more than your actual balance, with an interest charge on the overdraft.

Origination Fee: The amount charged by a lender or a creditor to meet the administrative costs incurred during the processing of a loan.


Personal Loan: A loan that establishes the cause of consumer credit and is granted for personal use. Categorized under unsecured loans and is based on the borrower’s integrity, ability to pay and an individual?s credit worthiness. A borrower does not put up any collateral or security to guarantee the repayment of a personal loan thus personal loan bears high interest rates.

Point-of-Sale (POS):
A method by which consumers can pay for purchases by having their deposit accounts debited electronically without the use of checks.

Power of Attorney: A legal document authorizing one person to act on behalf of another.

Prepayment Premium: Money charged for an early repayment of debt. Prepayment premiums are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.
Prepaid Expenses: Taxes, insurance and assessments paid in advance of their due dates. These expenses are included at closing.

Prepaid Interest:
Interest that is paid in advance of when it is due. Typically charged to a borrower at closing to cover interest on the loan between the closing date and the first payment date.
Prepayment: Full or partial repayment of the principal before the contractual due date.

Prepayment Penalty:
A prepayment penalty is a fee that is charged if the loan is paid off earlier than the specified term of the loan. Depending on your loan program and applicable state law, you may or may not incur a prepayment penalty. Contact your loan officer for specific information.

Prime Rate: The interest rate charged by lenders to their best, most creditworthy customers. A less credit worthy customer may be offered a loan at the prime rate plus anywhere from 2 to 10 percent. Borrowing at below-prime also occurs, but is less common and usually applies to businesses, not individual consumers. The Federal Reserve determines whether to lower or raise the prime rate based on a variety of economic factors. Many consumer loans, such as auto, home equity, mortgage and credit card loans are based upon the prime rate. Building and maintaining a good credit history are two of the most important qualifications for prime-rate borrowing.

The total amount of a loan, not including any capitalized fees or interest.

Payments: Every month you are required to put money towards what you owe which is considered your monthly payment.

Payment Schedule: The method for disclosing your payment schedule varies by loan type. For fixed-rate loans, the payment schedule indicates what your required monthly payment will be throughout the life of your loan. The payment schedule for VA, FHA, one-time MIP and uninsured conventional loans should also indicate a fixed monthly payment. The payment schedule for fixed-rate insured loans may gradually decrease over time due to a declining insurance premium. For adjustable rate loans, the payment schedules will vary by loan type and are based on conservative assumptions of future interest rates.
Personal cards: A personal credit card is used for your own use to make purchases that are needed for various reasons. This is different from a business card, which makes purchases that support or benefit a business operation.

Plastic: A slang term for a credit card.

Premium cards: This is a group of cards for people or businesses with outstanding credit. They are offered special privilege cards that have higher limits, lower interest, or no limit at all.

Prepaid credit card:
Some credit card companies have cards with the option of paying first and using later. This is generally for people who have had some sort of credit difficulty. You would put money onto the card and then have that amount to spend.

Promotions: This refers to the various deals that companies offer to lure you to their business. Some deals include low interest, balance transfer rewards, points or air miles, or even money towards vehicles. If you?re in the market for a card, you can look around to see who has the best promotion.

This refers to the insurance you can have on your card to protect you in times that you may not be able to make payments, such as the loss of a job. In addition, there is insurance to protect you if your card is lost or stolen.

The company or lender from which you are obtaining a credit card.

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