Every loan term, in plain English.
Loan offers and agreements are full of jargon. This glossary defines the terms you are most likely to see, so you can read a disclosure, compare offers and ask lenders the right questions.
- 40 terms. The words that appear most in loan offers and contracts.
- No jargon. Each definition fits in a sentence or two.
- Linkable. Every term has its own link you can share.
Written by the Lendli Editorial Team under our editorial policy. Last reviewed .
Glossary A to Z
Tap a letter to jump, or scroll through the full list.
A
- Acceleration clause
- A contract term that lets the lender demand the full remaining balance at once if you default.
- Adverse action notice
- The letter a lender must send when it denies credit or offers worse terms, with the reasons and your rights.
- Amortization
- Repaying a debt through scheduled payments that cover interest first and gradually reduce principal.
- Amount financed
- The loan amount available to you after prepaid finance charges are subtracted, as shown on a TILA disclosure.
- Annual percentage rate (APR)
- The yearly cost of credit, combining interest and certain required fees, stated on the amount you receive.
- Autopay discount
- A rate reduction some lenders give when payments are drawn automatically from your bank account.
B
- Balance transfer
- Moving a balance from one credit card to another, often to use a lower promotional rate.
C
- Charge-off
- An accounting step where a lender writes off a seriously overdue debt as a loss; you still owe it.
- Closing costs
- Fees paid to finalize a secured loan such as a home equity loan, including appraisal and title charges.
- Co-borrower
- A second applicant who shares ownership of the loan funds and equal responsibility for repaying them.
- Collateral
- Property pledged to secure a loan, which the lender can claim if the loan is not repaid.
- Credit freeze
- A free block on new access to your credit reports that makes it harder for others to open accounts in your name.
- Credit report
- A record of your credit accounts, payment history and inquiries, kept by Equifax, Experian and TransUnion.
D
- Debt-to-income ratio (DTI)
- Total monthly debt payments divided by gross monthly income, used to judge affordability.
- Deferred interest
- A promotion where interest builds in the background and is charged in full if the balance is not paid by the deadline.
- Delinquency
- A payment that is past due; it is usually reported to credit bureaus once it is 30 days late.
- Draw period
- The window when you can borrow from a line of credit such as a HELOC, often followed by a repayment period.
E
- Equity
- The part of an asset you own outright: its value minus what you owe on it.
F
- Factor rate
- A multiplier used to price some business financing; a 1.25 factor means repaying $1.25 per $1 advanced.
- Finance charge
- The total dollar cost of credit, including interest and certain fees, shown on your loan disclosure.
- Fixed rate
- An interest rate that does not change during the loan, keeping the scheduled payment the same.
G
- Grace period
- Time after a due date during which a payment is accepted without a late fee, if the lender offers one.
H
- Hard inquiry
- A credit check made when you apply for credit; it may lower your score slightly for up to a year.
- HELOC
- A home equity line of credit: a revolving credit line secured by your home.
I
- Installment loan
- A loan repaid in a set number of scheduled payments, such as a personal, auto or mortgage loan.
L
- Lien
- A legal claim on property that secures a debt until it is repaid.
- Loan term
- The length of time you have to repay the loan in full.
O
- Origination fee
- A one-time charge for processing a new loan, often a percentage of the amount borrowed.
P
- Prepayment penalty
- A fee some lenders charge if you pay off a loan early; many personal loans do not have one.
- Prequalification
- An early estimate of what a lender may offer, usually based on a soft credit check.
- Principal
- The amount you borrowed and still owe, not counting interest or fees.
R
- Refinancing
- Replacing an existing loan with a new one, usually to change the rate, term or payment.
- Revolving credit
- Credit you can borrow, repay and borrow again up to a limit, like a credit card or line of credit.
S
- Secured loan
- A loan backed by collateral, which usually lowers the rate but puts the collateral at risk.
- Soft inquiry
- A credit check that does not affect your score, such as checking your own credit or prequalifying.
T
- Total of payments
- The sum of all scheduled payments over the life of the loan, shown on your TILA disclosure.
U
- Underwriting
- The lender's review of your credit, income and other details to decide whether and how to lend.
- Unsecured loan
- A loan with no collateral, approved mainly on credit and income.
- Utilization
- How much of your available revolving credit you are using, expressed as a percentage.
V
- Variable rate
- A rate that moves with a benchmark index, so the payment can go up or down during the loan.
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