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APR (Annual Percentage Rate)Borrowing

A yearly percentage used to describe the cost of borrowing. Depending on the product, APR may account for interest and certain fees, which can help with comparisons.

ExampleWhen comparing two loans, looking at the APR can provide more information than looking only at the interest rate.

BudgetPlanning

A plan for how money and other resources may come in, be saved, and be used during a period of time.

ExampleA monthly budget might include income, housing, food, transportation, savings, and other priorities.

Cash flowPlanning

The movement and timing of money or resources coming in and going out.

ExampleA monthly total may look balanced while a bill due before payday still creates a difficult week.

CreditCredit and debt

An arrangement that lets a person borrow money or receive something now with an agreement to pay later.

ExampleLoans and credit cards are common forms of credit.

Credit reportCredit and debt

A record containing information reported about credit accounts, balances, payment history, and other credit activity.

ExampleA person can review their reports to look for accounts or information that may be incorrect.

Credit scoreCredit and debt

A number produced by a scoring model using information from a credit report. A person can have several scores because models and report information can differ.

ExampleA mortgage lender may use a different scoring model than a score displayed by another service.

DebtCredit and debt

Money or another obligation that a person or organization owes.

ExampleA credit-card balance, car loan, or unpaid medical bill may be a debt.

Emergency savingsSaving

Money set aside for expenses or financial changes that were not part of the regular plan.

ExampleEmergency savings might help with a car repair, broken appliance, medical cost, or temporary loss of income.

ExpensesPlanning

Money used to pay for needs, obligations, goals, and other purchases or services.

ExampleHousing, utilities, transportation, food, debt payments, and savings contributions may all be included when reviewing expenses.

IncomePlanning

Money received from work, business activity, benefits, investments, or other sources.

ExampleIncome may arrive on a regular schedule or change from one month to another.

InterestBorrowing

Money charged for borrowing or money that may be earned on certain deposits or savings products.

ExampleA borrower may pay interest on a loan, while a financial institution may pay interest on a savings account.

Irregular incomePlanning

Income whose amount, timing, or both can change.

ExampleSeasonal work, self-employment, tips, and changing work hours can create irregular income.

LenderBorrowing

A person or organization that provides money with an agreement that it will be repaid under stated terms.

ExampleA bank, credit union, finance company, or individual may act as a lender.

PrincipalBorrowing

The original amount borrowed, separate from interest and some other borrowing costs.

ExampleIf someone borrows $1,000, that $1,000 begins as the loan principal.

SavingsSaving

Money kept for future needs, goals, choices, or unexpected expenses rather than used immediately.

ExampleSomeone may save for an emergency, a home, education, a family event, or another personal priority.

Secured debtBorrowing

Debt connected to property the lender may have a right to take if the agreement is not repaid as required.

ExampleMany vehicle loans and mortgages are secured by the vehicle or home.

Unsecured debtBorrowing

Debt that is not tied to specific property used as collateral, though nonpayment can still have serious consequences.

ExampleMany credit cards and personal loans are unsecured debts.

AssetPlanning

Something a person or organization owns that has financial value.

ExampleMoney in an account, a vehicle, land, or a home may be considered an asset.

Automatic paymentPlanning

A payment arranged to move electronically from an account on a scheduled date.

ExampleSomeone might schedule a utility payment each month, while making sure enough money will be available to avoid an overdraft.

BalancePlanning

The amount of money in an account or the amount still owed on a debt at a particular time.

ExampleA checking-account balance shows available funds, while a loan balance shows an amount remaining to be repaid.

BankSaving

A financial institution that may accept deposits and offer services such as accounts, payments, and loans.

ExampleA person might use a bank for a checking account, savings account, or loan.

BorrowerBorrowing

A person or organization that receives money or credit and agrees to repay it under stated terms.

ExampleA person who signs for a car loan is the borrower responsible for the agreement.

CollateralBorrowing

Property connected to a secured debt that a lender may have the right to take if the agreement is not repaid as required.

ExampleA vehicle commonly serves as collateral for an auto loan.

Compound interestSaving

Interest calculated on an original amount and on interest that has already been added.

ExampleCompound interest can help savings grow, and it can also increase a debt balance when interest is added to what is owed.

Credit cardCredit and debt

A revolving form of credit that allows purchases or other transactions up to an approved limit, followed by repayment under the account terms.

ExampleIf a balance carries into another billing period, interest may be charged according to the card agreement.

Credit limitCredit and debt

The maximum amount a lender currently allows a borrower to use on a revolving credit account.

ExampleA card with a $1,000 credit limit does not provide $1,000 of the cardholder's own money; purchases become debt that must be repaid.

Credit utilizationCredit and debt

A comparison between revolving credit balances and the available credit limits on those accounts.

ExampleIf a card has a $1,000 limit and a $200 reported balance, that card is using 20 percent of its limit.

Debit cardPlanning

A card that generally uses money from a linked deposit account rather than borrowing from a credit line.

ExampleA debit-card purchase may reduce the available balance in a checking account.

DefaultCredit and debt

Failure to meet a credit agreement's repayment requirements for long enough that the account reaches a serious nonpayment status defined by the agreement or applicable rules.

ExampleThe timing and consequences of default vary by product, so the loan or account documents matter.

DelinquencyCredit and debt

A status indicating that a required debt payment was not made by its due date.

ExampleAn account can become delinquent before it reaches the more serious status of default.

Direct depositPlanning

An electronic transfer that places money directly into an account instead of using a paper check.

ExamplePay, benefits, or a tax refund may be delivered through direct deposit.

FeeBorrowing

An amount charged for a product, service, transaction, or account event.

ExampleAn account might charge a monthly fee, ATM fee, late fee, or overdraft fee depending on its terms.

Financial institutionSaving

An organization that provides financial services, such as holding deposits, processing payments, or making loans.

ExampleBanks and credit unions are common types of financial institutions.

Fixed expensePlanning

An expense that is usually due on a regular schedule and tends to stay similar from one period to the next.

ExampleRent may be a fixed monthly expense even though other costs change.

Minimum paymentCredit and debt

The smallest payment an account requires by the due date to meet that billing period's basic payment requirement.

ExamplePaying only the minimum on a credit card can take longer and may increase the total interest paid.

Net incomePlanning

Income remaining after taxes and other deductions have been taken out.

ExampleThe amount deposited from a paycheck may be net income rather than the larger gross-pay amount.

OverdraftPlanning

A transaction or account situation in which spending or withdrawal exceeds the money available in a deposit account.

ExampleDepending on the account and transaction, an overdraft may be declined, covered, or followed by a fee.

Secured credit cardCredit and debt

A credit card that generally requires a refundable security deposit, while purchases still create a balance that must be repaid.

ExampleThe deposit may help set the credit limit, but it normally does not replace the required monthly payment.

TermBorrowing

The length of time an agreement, loan, or financial product is scheduled to last.

ExampleA five-year vehicle loan has a longer term than a three-year vehicle loan.

Variable expensePlanning

An expense whose amount or frequency can change from one period to another.

ExampleFood, fuel, utilities, and household purchases may vary by month.

Financial glossary

Glossary terms