In this glossary, you will find definitions for commonly used terms related to credit and debt. Knowing what these terms mean will help you make informed decisions about your finances.
Acceleration Clause. A provision in a loan agreement that allows a creditor to demand payment in full if you do not meet the terms of the agreement.
Accrued Interest. Interest that accumulates on a debt that you owe.
Annual Percentage Rate (APR). The cost of credit, expressed as a yearly rate. The federal Truth in Lending Act requires that all offers for credit indicate the credit’s APR so that consumers can understand the cost of the credit they are applying for and so they can compare credit offers.
Balloon Payment. A final payment on a loan that is substantially larger than previous payments.
Bankruptcy. A legal procedure governed by federal law that helps consumers who have too much debt. If you file for Chapter 13, you will have three to five years to pay off your debts, and the balance of what you owe on certain debts will be wiped out at the end of that time. Some debts will remain. If you file for Chapter 11, you will have to give up certain assets so that they can be sold and the proceeds will be applied to your debts.
Cash Advance. Cash obtained from a credit card.
Cash Value. The savings portion of a whole life, universal, or variable life insurance policy. You can borrow against that value.
Closed-End Credit. A loan that you must repay by making fixed payments over a specified ...