Glossary

Use this glossary as a guide to financial terms. Click on the letters to view definitions.                                                         Glossary

APR: Annual Percentage Rate (APR) measures the cost of borrowing money. It reflects the interest rate.

Assets: Anything owned by an individual.

Bank: A for profit financial institution that accepts deposits and channels these deposits into lending activities.

Bankruptcy: A process in which consumers can eliminate or repay some of or all of their debts under the protection of the federal bankruptcy court.

Bonds: A loan an investor makes to a corporation, government, federal agency or other organization. The issuer (borrower) enters into a legal agreement to pay you (bondholder) interest for loaning them money.

Certificate of Deposit (CD): A certificate issued by a bank to a person depositing money for a specified length of time.

Collateral: Something that is pledged as security for the repayment of a loan or that is forfeited in the event of default.

Consumer: A person who uses or buys products.

Consumer Credit: A line of credit that is extended for personal or household use.

Compound Interest: Interest credited daily, monthly, quarterly, semi-annually, or annually on principal and previously credited interest.

Credit Report: A document that contains the records of all of your borrowing and payment history.

Credit Union: A member-owned, non-profit financial institution that provides financial services to its members.

Deed-in-Lieu: Your mortgage company lets you give back the title to your home, transferring ownership to them.

Deferment: Temporarily postponing your student loan payments.

Expense: The cost of a good or service.

Forbearance: An agreement between you and your lender to reduce or to stop making payments for up to 12 months. Interest will still accrue.

Foreclosure: The process of taking possession of a mortgaged property as a result of the mortgagor’s failure to keep up mortgage payments.

HAFA: Home Affordable Foreclosure Alternatives (HAFA) provides two options for transitioning out of your mortgage; either a short sale or Deed-in-Lieu foreclosure.

HAMP: Home Affordable Modification Program (HAMP) is a federal program set up to help eligible home owners with loan modifications on their mortgage debt.

HECM: Home Equity Conversion Mortgage (HECM) refers to a reverse mortgage that is insured by HUD and FHA. The HECM program contains special requirements like HUD counseling and a property value ceiling.

Income: Earnings from work or investments.

IRA: Individual Retirement Arrangements (IRAs) are the basic sort of retirement arrangements. They are set up by financial institutions that allow an individual to save for retirement with tax-free growth or on a tax-deferred basis.

MHA: Making Home Affordable (MHA) is a strategy to help homeowners avoid foreclosure, stabilize the country’s housing market, and improve the nation’s economy.

Mutual Fund: Offered by companies that combine money from many investors to purchase numerous separate investments.

Payday Loans: A relatively small amount of money lent on a high rate of interest based on the agreement that it will be repaid when the borrower receives their next paycheck.

PITI: An acronym for Principal, Interest, Taxes and Insurance. It is what your monthly mortgage payment consists of.

PMI: Private Mortgage Insurance (PMI) is mortgage insurance that is required if your down payment on a home is less than 20% of the appraised value or sale price. The insurance policy protects the lender in case you default on the payments.

Rent-to-Own: A financing agreements wherein the lessor agrees to collect monthly payments from a lessee for a specific amount of time, after which the lessor switches the title over to lessee.
Short Sale: The sale of real estate in which the proceeds from selling the property will fall short of the balances of debt secured by liens against the property and the property owner cannot afford to repay the liens full amount.
Title Loans: High cost, short-term small loans secured by a vehicle that the borrower usually owns outright.
W4: A form used by employers to determine the amount of taxes to withhold from your paycheck.
401k: A retirement savings plan established by an employer that lets its employees set aside a percentage of their pay before taxes are taken out.

529 Plan: an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs.