Payday Loan Glossary

You will hear and see many different terms when you are dealing with payday loans. It is helpful to understand these terms before doing business. The terms are as follows:

• Cap: the maximum allowable increase used for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage. See Adjustable Rate Mortgages for a complete guide.
• Payday loan: a loan made as a payday loan generally until ones next payday.
  Ceiling: maximum allowable interest on an adjustable rate mortgage over the life of the loan.
• Closing: the time and place at which all documents for your loan are signed, dated and notarized.
• Closing costs: any fees paid by the borrowers or sellers during the closing of the mortgage loan. This normally includes an origination fee, discount points, attorney's fees, title insurance, survey, and any items which must be prepaid, such as taxes and insurance escrow payments.
• Credit limit: the maximum amount that you can borrow.
• Credit Repository: An organization that gathers, records, updates, and stores financial and public records information about the payment records of individuals who are being considered for credit.
• Adjustable rate: an interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.
• Annual percentage rate: the cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. It does not include title insurance, appraisal, and credit report.
• Basis point: one one-hundredth of a percentage point. The difference between 8.00 percent and 8.01 percent is one basis point.
• Debt: amount owed to another.
• Delinquency: failure to make mortgage payments when mortgage payments are due.
• Equal Credit Opportunity Act, EOCA: a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
• Fair Reporting Act: a consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one's credit record.
• Fixed Rate: an interest rate fixed for the term of the loan. Payments as well are fixed at one amount.
• Gross income: the income of the borrower before taxes or expenses which are deducted and used for qualifying purposes.
• Household income: the total income of all members of a household. An important yardstick used by lenders evaluating applications for joint credit.
• Interest only loan: an advance of money in which the installments pay only the interest that accumulates on the loan balance. The loan balance does not decrease with the payments. Usually the interest-only payments last for a limited period, after which payments rise and the borrower begins paying principal in addition to interest.
• Late charge: A fee imposed on a borrower for not paying on time.
• Lender: The bank, mortgage company, or mortgage broker offering the loan.
• Line of credit: A commitment by a financial institution to lend up to a specified maximum amount to a customer during a specified period of time.
• Loan application: A document in which a prospective borrower details his or her financial situation to qualify for a loan.
• Origination fee: The fee a lender charges to process a loan. It usually includes the cost to prepare loan documents, check a borrower's credit history, inspect the property and sometimes conduct an appraisal.
• Payday Loan: A payday loan made generally until ones next payday, the amount of money borrowed, the amount of money owed, excluding interest, the client of a real-estate agent.
• Rate: The annual rate of interest on a loan, expressed as a percentage of 100.
• Truth in Lending Act: A federal law requiring a disclosure of credit terms using a standard format. This is intended to facilitate comparisons between the lending terms of different financial institutions.
• Unsecured Loan: An advance of money that is not secured by collateral.
• Verification of employment: Confirmation that a loan applicant is telling the truth about where he or she works and how much he or she makes.