Terms Definitions

Assess the value or worth of something. Also used when evaluating the
(To) Appraise
value of a damage for a vehicle/insurance claim.
Ability to Re-pay An individual's financial capacity to make good on a debt.
In the context of a loan, refers to the declaration by a lender that the loan
Acceleration (Debt)
must be repaid early, i.e: before the agreed repayment date.
To accumulate over time—most commonly used when referring to the
Accrued
interest, income, or expenses of an individual or business.
ACH Transfer (Automated Electronic transaction that requires a debit from an originating bank and a
Clearing House) credit to a receiving bank.
The actual value for which the property could be sold, which is always less
Actual Cash value
than what it would cost to replace it.
Is a supplementary payment applied directly to your mortgage loan principal
Additional Principal Payment
amount.
Is an interest rate on a loan or security that fluctuates over time because it is
Adjustable interest rate (AIR) based on an underlying benchmark interest rate or index that changes
periodically.
Adjustable-rate mortgages (ARMs) come with an interest rate that changes
at predetermined intervals, such as annually or semi-annually. ARMs
Adjustable Rate Mortgage
typically have a low introductory rate, which translates to more affordable
monthly mortgage payments initially.
An adjustable-rate note is a debt instrument with an interest rate that can
Adjustable rate note
fluctuate over time.
An insurance company representative who investigates claims and makes
Adjuster settlement recommendations based on the estimate of the damages and the
company's liability.
An affidavit is a sworn statement put in writing. When you use an affidavit,
you’re claiming that the information within the document is true and correct
Affitdavit to the best of your knowledge.
Like taking an oath in court, an affidavit is only valid when you make it
voluntarily and without any coercion.
Afford To have enough purchasing power / Enough money to buy something.
Affordable Inexpensive; reasonably priced.
Allocate To distribute (resources or funds) for a particular purpose.
The process of sharing something, or the amount that you get. / To assign
Allotment
resources (monetary).
The gradual reduction of the debt through the repayments we agree with the
Amortization lender. Broadly speaking, loan amortization only considers the principal
and doesn't include interest.
Can refer to either a series of fixed payments (annuity) or a financial product
with an insurance company that requires either a lump sum payment or
Annuities
series of payments to collect a certain amount for retirement. (Retirement
annuity)
Appraiser A person whose job is to assess the monetary value of something.
Appreciation An increase in the value of an asset.
Arrears Arrears is money that is owed and should already have been paid.
The dollar value assigned to a home or other property for tax purposes. It
takes into consideration comparable home sales, location, and other factors.
Assessed Value
Assessed value is not the same as fair market value (what the property
could sell for) but is often calculated as a percentage of it.
A tax assessment is basically a way for the government to figure out how
much tax you owe. It’s like a detailed bill. They look at your income,
Assessment (Tax)
property, or other factors to determine your tax amount. After they assess it,
they send you a statement showing what you need to pay.
An asset is a resource with economic value that an individual or company
Asset
owns or controls with the expectation that it will provide a future benefit.
 A bank statement is an official document that summarizes your account
activity over a certain period of time—typically one month. You'll find records
Bank statement
of all transactions—both incoming and outgoing—so you know exactly what
was going on with your funds during that period.
A bill of sale is a written instrument that attests to a buyer's purchase of
Bill of Sale
property from a seller. In this way, it is similar to a receipt.
A bond is a fixed-income instrument and investment product where
individuals lend money to a government or company at a certain interest rate
Bond
for an amount of time. (An official paper given by the government or a
company to show that you have lent them money)
Bond ratings are representations of the creditworthiness of corporate or
government bonds. The ratings are published by credit rating agencies and
Bond rating
provide evaluations of a bond issuer's financial strength and capacity to
repay the bond's principal and interest according to the contract.
Borrower A borrower is a person or organization that borrows money
Budget Estimation of income and expenditure for a set period of time.
A bull market is commonly defined as a period of time when major stock
market indexes are generally rising, with market indexes eventually reaching
Bull market
new highs. (Reminder: A stock market index is a collection of stocks that are
tracked over time to gauge their overall performance.
The financial ability of a person or group to buy things / The available funds
Buying Power
to spend.
Refers to the "limit" of the variable. Interest rate cap for example is the limit
Cap (interest/rate/payment) to how much an interest can increase to. If the interest rate cap is 12%, that
means it will not go higher than 12%.
Wealth in the form of money or other assets owned by a person or
Capital organization or available for a purpose such as starting a company or
investing.
Capital gains refers to profits gained from the sale of capital assets. Almost
everything someone owns and uses for personal or investment purposes is
Capital gain a capital asset. This includes a home, personal-use items like household
furnishings, vehicles, or intangibles such as stocks or bonds held as
investments.
Capital markets are financial markets that bring buyers and sellers together
Capital market to trade stocks, bonds, currencies, and other financial assets. Capital
markets include the stock market and the bond market.
A credit card statement is a summary of how you've used your credit card
Card statement
for a billing period.
Refers to the net balance of cash moving into and out of a business at a
Cash flow
specific point in time.
A certificate of deposit (CD) is a type of savings account that pays a fixed
Certificate of deposit (CD)
interest rate on money held for an agreed-upon period of time.
Checking accounts allow you to deposit money that you can then draw
against to pay bills or make purchases. They also may be called
Checking Account transactional accounts. Checking accounts are different from savings
accounts because—rather than being designed to hold money for the long-
term—they're meant for everyday use.
Collateral is an asset of value that a borrower pledges as a guarantee that a
loan will be repaid. Collateral is a tangible or intangible asset pledged to
secure a loan. If the borrower stops repaying the loan, the lender can seize
Collateral
and sell the collateral to get their funds back. (For example: Use a vehicle as
a collateral. If you are unable to pay, the bank holds the rights over the
vehicle).
When borrowers fail to make timely repayments on their loans or credit
Collections obligations, financial institutions initiate collection activities to recover the
outstanding amounts
Commodities are economic goods that are used to either produce other
Commodity goods or to be traded for another good/asset. Such are; agricultural
resources, mining products like iron, sugar, or grains like rice and wheat.
 Compound interest is interest that applies not only to the initial principal of
an investment or a loan, but also to the accumulated interest from previous
periods. In other words, compound interest involves earning, or owing,
interest on your interest.This means that every period that an interest is
compounded it's based on the current balance and not initial balance. (This
applies to debts and investments)
Compound interest Example:
Year 1: You earn 5% interest on $1,000, which is $50. So, you now have
$1,050.
Year 2: You earn 5% interest on $1,050, which is $52.50. So, you now have
$1,102.50.
Each year, the interest is calculated on the new, higher balance, allowing
your money to grow faster over time.
Consumer Financial Agency that implements and enforces Federal consumer financial Law.
Protection Bureau
A person or organization that signs another person's application (= request)
Cosigner
to borrow money, rent an apartment, etc. promising to pay if they do not:
A creditor is an individual or institution that extends credit to another party to
Creditor
borrow money usually by a loan agreement or contract.
A debt collector is a person or a company that regularly collects debts owed
Debt collector to others, usually when those debts are past-due. Debt collectors include
collection agencies or lawyers who collect debts as part of their business.
Debt settlement is the process of negotiating a payment for less than what
you currently owe. Also: Debt settlement sometimes involves offering a
Debt settlement
lump-sum payment to a creditor in exchange for a portion of your debt being
forgiven.
Debtor Individual or company that owes money.
A deed is a signed legal document that transfers ownership of an asset to a
new owner. Deeds are most commonly used to transfer ownership of
Deed property or vehicles between two parties. The purpose of a deed is to
transfer a title, the legal ownership of a property or asset, from one person
or company to another.
A deed of trust is a document used in real estate transactions. It represents
Deed of trust an agreement between the borrower and a lender to have the property held
in trust by a neutral and independent third party until the loan is paid off
Default on Payment means failure to pay a Debt or its instalment when due
stated in the Loan Agreement. A late payment becomes a default when it
Default
goes unpaid for a certain period, typically 30 days or more, depending on
the terms of the loan or credit agreement.
Deferment is an option that allows you to temporarily pause your loan
Deferment
payments with the lender's approval.
In accounting: expenses that have been prepaid, or early receipt of
revenues. In other words, it is payment made or payment received for
products or services not yet provided.
Deferral
For loans and payments: Refers to the act of delaying or postponing the
payment to a later date.
This is when a payment is delayed for a later date. In simple terms, a
Deferred balance / interest
deferred balance refers to delaying the recognition of certain transactions.
Being delinquent refers to the state of being past due on a debt.
Delinquent
Delinquency occurs as soon as a borrower misses a payment on a loan
Depreciation Is the reduction in the value of an asset over time.
A dividend is a distribution of earnings, often quarterly, by a company to its
Dividends
shareholders in the form of cash or stock reinvestment.
Down payments are a portion of a payment that is paid upfront. Usually
Down payment
covering a percentage of the total debt, like 3% or 20%.
To make it easy to understand: "assets-minus-liabilities" or: "Gained value
Equity minus debts, or owed values".
When talking about mortgages and houses: Equity is the difference between
 what you owe on your mortgage and what your home is currently worth. If
you owe $150,000 on your mortgage loan and your home is worth $200,000,
you have $50,000 of equity in your home.
A home equity loan (sometimes called a HEL) allows you to borrow money
using the equity in your home as collateral. Equity is the amount your
Equity loan property is currently worth, minus the amount of any existing mortgage on
your property. You receive the money from a home equity loan as a lump
sum.
An agreement between two people or organizations in which money or
Escrow property is kept by a third person or organization until a particular condition
is met :
An escrow account is a special type of account held by a third party, known
Escrow account
as the escrow agent, on behalf of two other parties involved in a transaction.
The term "escrow amount" refers to the specific sum of money that is placed
Escrow amount
in an escrow account as part of a transaction.
An Escrow Analysis is a review of your escrow account to ensure enough
Escrow analysis funds are collected to pay upcoming installments of your insurance
premium(s) and/or property taxes.
An escrow shortage happens when there's not enough funds to pay the
property taxes and insurance. This usually happens when the cost of these
Escrow shortage
items increase. If a shortage is found, the amount is evenly divided and
added to the next 12 mortgage payments.
The Escrow Account Statement details your escrow account changes and
Escrow statement
how it will impact your monthly mortgage payment for the next 12 months.
The meaning of FORBEARANCE is a refraining from the enforcement of
something (such as a debt, right, or obligation) that is due.
Forbearance
In simple terms, it means that a loan's payment will be stopped or postponed
for a later date. Typically used for mortgages or student loans.
The action of taking possession of a mortgaged property when the
Forclosure (mortgage)
mortgagor fails to keep up their mortgage payments.
Gross assets are fixed tangible assets (like machinery) and current assets
(cash in the bank or an asset that can be converted into cash within that
Gross assets
financial year). In calculating the assets, it's the full value of the asset which
should be taken into account - you should not factor in depreciation.
Gross income for an individual—also known as gross pay when it's on a
paycheck—is an individual's total earnings before taxes or other deductions.
Gross Income This includes income from all sources, not just employment, and is not
limited to income received in cash; it also includes property or services
received.
The gross margin is the difference between revenue and the cost of an
Gross margin asset/good. In terms of loans or financial assets, that "margin" refers to the
profit made out of the transaction.
Home equity represents the difference between the market value of the
Home Equity home and the outstanding balance. Same as the Equity example; if you owe
$150,000 and the net value is $200,000 then your equity is $50,000.
Individual Tax Payer -
Identification Number ( I.T.I.N)
The Internal Revenue Service (IRS) is the revenue service for the United
IRS (Internal Revenue States federal government, which is responsible for collecting U.S. federal
Service) taxes and administering the Internal Revenue Code, the main body of the
federal statutory tax law.
A levy is a legal seizure of property to satisfy a debt. Often confused with
Levy Lien. A Lien is a claim against the rights of a property to secure a payment
while the levy actually takes the property to satisfy that debt.
Liability is CONTEXT-DEPENDANT. While it means the same, the terms
Liability used are different in some situations.
A liability IN FINANCE is a legal responsibility or obligation to pay a debt.
A right to keep possession of property belonging to another person until a
Lien
debt owed by that person is discharged.
 Liquid assets refer to cash on hand, cash on bank deposit, and assets that
Liquid asset can be quickly and easily converted to cash. The common liquid assets are
stock, bonds, certificates of deposit, or shares.
A lump sum payment is an amount of money that is paid in one single
Lump Sum Payment
payment rather than in installments.
A money order is a paper document, similar to personal checks in that the
person paying identifies who the money order is payable to and sets the
Money Order
dollar amount. Unlike checks, you must purchase money orders with cash
up front, rather than have the funds come out of your checking account.
Net assets are the value of a company's assets minus its liabilities. It is
Net assets calculated ((Total Fixed Assets + Total Current Assets) – (Total Current
Liabilities + Total Long-Term Liabilities)).
Net income is gross income minus expenses, interest, and taxes. Net
Net Income
income reflects the actual profit of a business or individual.
Net profit margin, or simply net margin, measures how much net income or
profit a company generates as a percentage of its revenue. It is the ratio of
Net margin net profits to revenues for a company or business segment. Net profit
margin is typically expressed as a percentage but can also be represented
in decimal form.
Note (In context of debts and It is a contract for a loan that specifies when the loan must be repaid and
mortgages) usually also the interest payable.
Payroll Total amount of compensation a company gives to employees.
To prorate is to divide something in a proportional way, based on time. If
Prorate (Prorated) your new landlord prorates your first month's rent, she only charges you for
the days you've lived in your apartment.
Buying power and purchasing power are not the same thing. Buying power
is the number of securities that you could purchase with a given amount of
Pruchasing power
money, whereas purchasing power is how much a unit of currency will buy,
such as how much you can purchase with one dollar.
The basic revenue definition is the total amount of money brought in by a
company's operations, measured over a set amount of time. A business's
Revenue revenue is its gross income before subtracting any expenses. Profits and
total earnings define revenue—it is the financial gain through sales and/or
services rendered.
A routing number is nine digits that identify the financial institution that holds
Routing number your account, while an account number is the unique 9-to-12-digit number
that identifies your specific account within that financial institution.
A salary is a fixed amount that is paid to an employee at regular intervals,
Salary
irrespective of the hours or amount of work performed.
A state or situation in which something needed cannot be obtained in
Shortage
sufficient amounts. / Deficit of an asset or lack thereof.
It is a program for people that have too much income to be eligible for
Medicaid. For example, a person over 65 is denied Medicaid because her
monthly income is $50 more than the limit for Medicaid eligibility. If she
Spend down program
incurs medical bills of $50 per month, the rest of her medical bills will be
covered by Medicaid. The spend down in this case is the $50 of medical bills
she incurs.
A stock represents a share in the ownership of a company, including a claim
on the company's earnings and assets. As such, stockholders are partial
Stocks
owners of the company. Fractional shares of stock also represent ownership
of a company, but at a size smaller than a full share of common stock.
Stocks and Bonds -
Your surplus is the amount of money the bank estimates you will have left
Surplus
over after dealing with all of your financial commitments.
A taxpayer is an individual or business entity that is obligated to pay taxes to
Tax payer
a federal, state, or municipal government body.
A tax return is a documentation filed with a tax authority that reports income,
Tax return
expenses, and other relevant financial information.
 A trust is a legal vehicle that allows a third party, a trustee, to hold and direct
Trust
assets in a trust fund on behalf of a beneficiary.
An underwriter is any party, usually a member of a financial organization,
that evaluates and assumes another party's risk in mortgages, insurance,
Underwriter
loans, or investments for a fee, usually in the form of a commission,
premium, spread, or interest.
Underwriting is the process of evaluating risks to protect investors, banks,
insurance agencies and other financial institutions. Typically, an underwriter
Underwritting
performs this risk analysis to make recommendations for loans, investments
and insurance policies.
A wage is the remuneration paid to an employee, usually on an hourly, daily,
Wage
or piece rate basis.