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If you are current on your credit card payments th … moreIf you are current on your credit card payments then the amount due is equal to the minimum monthly payment, which is usually between 2 and 5 percent of your credit card balance.
If you are delinquent on your credit card then the amount due is the amount that you need to pay in order to get back into good standing. More specifically, the amount due in this scenario is the sum of all the consecutive minimum payments that you have missed plus the amount of the upcoming minimum payment. For example, if you just missed one minimum payment of $30 and the upcoming minimum payment is another $30 then the amount due will be $60.
If you are delinquent on your credit card then the amount due is the amount that you need to pay in order to get back into good standing. More specifically, the amount due in this scenario is the sum of all the consecutive minimum payments that you have missed plus the amount of the upcoming minimum payment. For example, if you just missed one minimum payment of $30 and the upcoming minimum payment is another $30 then the amount due will be $60.
The rate at which amounts owed to a bank on a cred … moreThe rate at which amounts owed to a bank on a credit card or loan account appreciate in value over time, increasing one's debt. In other words, this percentage of your average balance over the course of the month or year is tacked onto what you owe. When it comes to credit cards, the APR, or interest rate, is only relevant when you don't pay for the total amount of your purchases in a respective month.
For example, if your loan has a 10% APR, you will pay $10 annually for every hundred dollars of balance.
Usually, different types of credit card transactions have different APRs. One card might have a different APR for cash advances than for purchases or balance transfers. Also, some credit cards appeal to consumers with a low introductory APR; for example, 0% APR on balance transfers (or purchases) for six months.
For example, if your loan has a 10% APR, you will pay $10 annually for every hundred dollars of balance.
Usually, different types of credit card transactions have different APRs. One card might have a different APR for cash advances than for purchases or balance transfers. Also, some credit cards appeal to consumers with a low introductory APR; for example, 0% APR on balance transfers (or purchases) for six months.
A debt that cannot be collected, which is written … moreA debt that cannot be collected, which is written off as a loss against a lender's taxes. Debt must be charged off in three cases: if it is a certain number of days past due (120 days for a loan and 180 days for credit card debt), if the debt holder dies, or if the debt holder goes bankrupt.
A charged-off debt is not forgiven, though, and it stays on your credit report for 7 years. Lenders also generally sell charged-off debt to collection agencies who will attempt to recoup the debt through various means including lawsuit until its statute of limitations runs out, a time period that varies by state.
A charged-off debt is not forgiven, though, and it stays on your credit report for 7 years. Lenders also generally sell charged-off debt to collection agencies who will attempt to recoup the debt through various means including lawsuit until its statute of limitations runs out, a time period that varies by state.
Something of value that is pledged to pay off a lo … moreSomething of value that is pledged to pay off a loan or debt if payments aren't made according to the agreement. Also called security.
Mortgages and car loans are known as "secured" loans given that the underlying assets they are used to purchase (i.e. a house or a car) serve as collateral for the original loan. In other words, if a borrower does not make payments as originally agreed, the lender may be able to sell the aforementioned assets in order to recoup amounts owed.
Mortgages and car loans are known as "secured" loans given that the underlying assets they are used to purchase (i.e. a house or a car) serve as collateral for the original loan. In other words, if a borrower does not make payments as originally agreed, the lender may be able to sell the aforementioned assets in order to recoup amounts owed.
Violation of your terms and conditions agreement; … moreViolation of your terms and conditions agreement; failure to pay your loan / credit card as agreed.
Monies billed on the balance of a credit card or l … moreMonies billed on the balance of a credit card or loan, usually expressed as a percentage of the amount of money owed. The specific rate of interest is referred to as an Annual Percentage Rate (APR).
An interest rate based on the banking system's flu … moreAn interest rate based on the banking system's fluctuating rate, usually in accordance with the Prime Rate.
The number of months that you can enjoy the "Intro … moreThe number of months that you can enjoy the "Introductory Rate" of your new credit card or loan, assuming you do not go into default.
If an "Introductory Period" is listed as a range (for example, 3 - 9 months), the final period will be determined by the credit card company after you submit your application. Their decision will be based on the strength of your credit history.
If an "Introductory Period" is listed as a range (for example, 3 - 9 months), the final period will be determined by the credit card company after you submit your application. Their decision will be based on the strength of your credit history.
Fancy term for saying that you are late on a loan … moreFancy term for saying that you are late on a loan or credit card payment.
Delinquency is measured in days, which correspond to the number of payments you have missed. That is why you'll sometimes hear "30 days delinquent" or "60 days delinquent", which would mean that you've missed one or two monthly payments, respectively, since your credit card or loan was in "good standing" (i.e. not late).
Delinquency is not reported to the major credit bureaus and you therefore do not incur credit score damage as a result of it until you have missed two consecutive payments (i.e. you're at least 60 days delinquency). In order to return your account to good standing, you must make payments for the number of months behind you are, plus the current month.
Delinquency is measured in days, which correspond to the number of payments you have missed. That is why you'll sometimes hear "30 days delinquent" or "60 days delinquent", which would mean that you've missed one or two monthly payments, respectively, since your credit card or loan was in "good standing" (i.e. not late).
Delinquency is not reported to the major credit bureaus and you therefore do not incur credit score damage as a result of it until you have missed two consecutive payments (i.e. you're at least 60 days delinquency). In order to return your account to good standing, you must make payments for the number of months behind you are, plus the current month.
Discount points are a form of prepaid interest tha … moreDiscount points are a form of prepaid interest that can be paid at the time of origination in order to lower the interest rate charged for the duration of a mortgage. One point costs 1% of the loan amount. For example, 1 discount point on a $100,000 mortgage would cost $1,000. Discount points are tax deductible in the year in which they are bought.
In general, buying one discount point will lower the interest rate on a 30-year mortgage by 0.125%, and the longer you plan on having your mortgage, the more sense it makes to buy a discount point.
In order to figure out whether purchasing discount points makes sense in your particular situation, you must determine 1) by exactly how much the discount point(s) will lower your interest rate; and 2) how the cost of purchasing the discount point(s) compares to the interest you will save with the lower rate over the amount of time you expect to have the loan in question.
Sometimes lenders also charge "origination points" to cover part of the cost of making a loan.
In general, buying one discount point will lower the interest rate on a 30-year mortgage by 0.125%, and the longer you plan on having your mortgage, the more sense it makes to buy a discount point.
In order to figure out whether purchasing discount points makes sense in your particular situation, you must determine 1) by exactly how much the discount point(s) will lower your interest rate; and 2) how the cost of purchasing the discount point(s) compares to the interest you will save with the lower rate over the amount of time you expect to have the loan in question.
Sometimes lenders also charge "origination points" to cover part of the cost of making a loan.
Closing costs are the fees and expenses that need … moreClosing costs are the fees and expenses that need to be paid in order to get finalize a mortgage or home equity loan. The closing costs you will be required to pay may vary from loan to loan, as some are state or federally mandated, while others are contractually provided for and can often be negotiated away. In addition, a borrower is not always required to foot the closing cost bill alone, as the seller will often chip in so as to secure a higher purchase amount or interest rate.
While there are no naming conventions for closing costs, meaning they may be referred to differently by different people, some of the most common are:
- Application Fee
- Appraisal Fees
- Document Preparation
- Notary Fee
- Recording Fee
- Survey Fee
- Title Service Fees
- Assumption Fee
- Attorney's Fees
- Brokerage Commission
- Discount Points
While there are no naming conventions for closing costs, meaning they may be referred to differently by different people, some of the most common are:
- Application Fee
- Appraisal Fees
- Document Preparation
- Notary Fee
- Recording Fee
- Survey Fee
- Title Service Fees
- Assumption Fee
- Attorney's Fees
- Brokerage Commission
- Discount Points
Indicates not only the length of time in which you … moreIndicates not only the length of time in which you are required to pay back your mortgage in its entirety, but also whether its interest rate will be fixed, variable or a mixture of the two. Some of the most common types of mortgages are 30-year fixed mortgages and 5/1 ARMs.
Fixed rate mortgages, like the 30-year fixed mortgage, have the same interest rate for the entire term, which could be any number of years.
Variable mortgages, more commonly known as adjustable-rate mortgages (ARMs), all have 30-year terms and offer a fixed interest rate for the first few years before switching to a variable interest rate that depends on either the Libor Rate or the Prime Rate. For example, a 5/1 ARM is an adjustable rate mortgage that has a fixed interest rate for the first 5 years and a variable interest rate that changes on an annual basis for the remaining 25 years.
Fixed rate mortgages, like the 30-year fixed mortgage, have the same interest rate for the entire term, which could be any number of years.
Variable mortgages, more commonly known as adjustable-rate mortgages (ARMs), all have 30-year terms and offer a fixed interest rate for the first few years before switching to a variable interest rate that depends on either the Libor Rate or the Prime Rate. For example, a 5/1 ARM is an adjustable rate mortgage that has a fixed interest rate for the first 5 years and a variable interest rate that changes on an annual basis for the remaining 25 years.
Title is another word for deed and is a legal docu … moreTitle is another word for deed and is a legal document that denotes ownership in a piece of property, typically a vehicle or house. When you finance such a purchase, your lender will hold the title until you have paid off your loan, at which point the title will be transferred to you through a process known as conveyance.
Oftentimes, prior to making a significant purchase, a title check will need to be done to ensure that the title is "clear," meaning there are no ownership disputes or encumbrances, such as an existing mortgage or governmental levy, attached to it.
Aside from ownership, a title may convey a number of other rights, including the right to put the property up as collateral for a loan, the right to enclose a property (e.g. put a fence around it), the right to allow others to use your property, etc.
Oftentimes, prior to making a significant purchase, a title check will need to be done to ensure that the title is "clear," meaning there are no ownership disputes or encumbrances, such as an existing mortgage or governmental levy, attached to it.
Aside from ownership, a title may convey a number of other rights, including the right to put the property up as collateral for a loan, the right to enclose a property (e.g. put a fence around it), the right to allow others to use your property, etc.
Refers to a vehicle's worth, as stated by the Kell … moreRefers to a vehicle's worth, as stated by the Kelley Blue Book, a widely-used reference guide that lists prices and values for new and used vehicles of all makes, models, and years. While people generally refer to Blue Book value when discussing car prices, it also contains information about motorcycles, RVs, personal watercraft, and snowmobiles.
For new vehicles, the Kelley Blue Book lists the Manufacturer Suggested Retail Price (MSRP), dealer sale price, and what other buyers paid (if you are accessing the information online). For used vehicles, it provides retail value, trade-in value, and private party value.
Private sellers often reference a car's Blue Book value in order to establish a fair sales price, and insurance companies use it to determine whether the car is worth fixing or should be declared a total loss.
For new vehicles, the Kelley Blue Book lists the Manufacturer Suggested Retail Price (MSRP), dealer sale price, and what other buyers paid (if you are accessing the information online). For used vehicles, it provides retail value, trade-in value, and private party value.
Private sellers often reference a car's Blue Book value in order to establish a fair sales price, and insurance companies use it to determine whether the car is worth fixing or should be declared a total loss.
Purchase loans for used cars typically charge high … morePurchase loans for used cars typically charge higher interest rates and have shorter terms than those for new cars. This speaks directly to the inherent differences between new and used cars. New cars are effective collateral given that they will still hold a great deal of value if a buyer defaults on his loan after a few months or even years. The lender can therefore simply sell the vehicle to recoup amounts owed. In addition to not being worth very much to begin with, used cars depreciate in value very quickly. Lenders therefore must mitigate risk in other ways.
New car loans typically have lower interest rates … moreNew car loans typically have lower interest rates and longer terms than their used counterparts because new cars will theoretically have enough trade-in value for the lender to recoup amounts owed to him if a borrower defaults on his obligations, while used car loan risk must be mitigated upfront.
Different institutions -- including banks, credit unions, and the financing arms of dealerships themselves-- offer new car loans, and it's a good idea to compare rates from all of them in order to find the best deal.
Different institutions -- including banks, credit unions, and the financing arms of dealerships themselves-- offer new car loans, and it's a good idea to compare rates from all of them in order to find the best deal.
Many loans allow you to sign up for an interest-on … moreMany loans allow you to sign up for an interest-only payment option at the time you take the loan out, giving you the freedom to either make a full payment -- both interest and part of the principal -- or pay only interest in any given month. Interest only-loans tend to have higher interest rates than conventional loans given the increased risk they represent for lenders. The higher rate, coupled with the fact that it takes longer to pay off a loan when only paying interest during certain months, means interest-only loans also generally wind up being more expensive for borrowers in the long run.
This type of payment structure is helpful for consumers who may not be able to truly afford a purchase at the time they make it but expect their financial situation to change in the near future.
This type of payment structure is helpful for consumers who may not be able to truly afford a purchase at the time they make it but expect their financial situation to change in the near future.
The guarantee that you will be approved for a part … moreThe guarantee that you will be approved for a particular financial product, should you wish to apply.
Pre-approval generally manifests itself in one of two ways. Credit card companies will often use publicly available information to identify consumers who comfortably qualify for certain credit card offers in order to more effectively target marketing. A consumer is more likely to sign up for a credit card for which they are assured of getting approved than respond to the chance simply to apply. In addition, many lenders will allow you to preliminarily apply for financing prior to determining what exactly you wish to purchase and will pre-approve you for a loan up to a certain amount, if you're qualified. This enables you to determine what you can afford and is often a prerequisite to seriously discussing the purchase of a home or car with the seller.
Pre-approval generally manifests itself in one of two ways. Credit card companies will often use publicly available information to identify consumers who comfortably qualify for certain credit card offers in order to more effectively target marketing. A consumer is more likely to sign up for a credit card for which they are assured of getting approved than respond to the chance simply to apply. In addition, many lenders will allow you to preliminarily apply for financing prior to determining what exactly you wish to purchase and will pre-approve you for a loan up to a certain amount, if you're qualified. This enables you to determine what you can afford and is often a prerequisite to seriously discussing the purchase of a home or car with the seller.
The amount you pay up front in "cash" when making … moreThe amount you pay up front in "cash" when making a significant purchase that will necessitate you taking out a loan in order to finance the rest of the transaction and pay off the remainder of the sale price over time.
The loan amount and terms you get approved for largely depend on your credit standing and income. The more responsible you've proven to be in handling past financial obligations and the more financially secure you are at the moment, the less of a perceived risk you will be to lenders and the better your interest rate and other key terms will be. Similarly, making a larger down payment and therefore relying on a loan to cover less of the purchase price will lessen a lender's level of concern since you're more invested in not defaulting on your loan and will too manifest itself in more advantageous loan terms.
The loan amount and terms you get approved for largely depend on your credit standing and income. The more responsible you've proven to be in handling past financial obligations and the more financially secure you are at the moment, the less of a perceived risk you will be to lenders and the better your interest rate and other key terms will be. Similarly, making a larger down payment and therefore relying on a loan to cover less of the purchase price will lessen a lender's level of concern since you're more invested in not defaulting on your loan and will too manifest itself in more advantageous loan terms.
The manner in which payments are divided over the … moreThe manner in which payments are divided over the course of a loan's term. Amoritization is commonly considered the most straightforward repayment model because it provides for equal payments over the life of a loan, and each payment contains both a portion of the principal loan amount and interest.
Your loan documents will generally include an amortization schedule, which will indicate when payments are due and how much they are.
Your loan documents will generally include an amortization schedule, which will indicate when payments are due and how much they are.
The length of time from when you take out a loan t … moreThe length of time from when you take out a loan to when it is required to be paid in full. Depending on the loan, this could be as short as a few months or as long as 30 years.
A loan's term, along with its interest rate and the amount to be borrowed, dictate the monthly payments you'll be required to make. A shorter-term loan will cost less overall given that you will be incurring less interest than with a longer loan of the same amount, but it will come with higher monthly payments given that you must pay off the same balance in a shorter period of time.
A loan's term, along with its interest rate and the amount to be borrowed, dictate the monthly payments you'll be required to make. A shorter-term loan will cost less overall given that you will be incurring less interest than with a longer loan of the same amount, but it will come with higher monthly payments given that you must pay off the same balance in a shorter period of time.
Also known as Private Mortgage Insurance, or just … moreAlso known as Private Mortgage Insurance, or just PMI, mortgage insurance protects lenders against financial losses caused by a borrower's inability to pay off a home loan. Federal law requires mortgage insurance for any home loan with a Loan-to-Value (LTV) ratio above 80% because borrowers who are unable to place a down payment of at least 20% are considered to be especially at risk of default.
While lenders are the ones who benefit from mortgage insurance, they typically require borrowers to fit the bill and factor it into the loan's monthly payment or ask for a lump-sum payment upfront. Borrowers may request that a mortgage insurance plan be cancelled once they've paid off 20% of their home's value, but lenders reserve the right to require it until the borrower reaches 50% equity.
While lenders are the ones who benefit from mortgage insurance, they typically require borrowers to fit the bill and factor it into the loan's monthly payment or ask for a lump-sum payment upfront. Borrowers may request that a mortgage insurance plan be cancelled once they've paid off 20% of their home's value, but lenders reserve the right to require it until the borrower reaches 50% equity.
A type of loan that allows you to borrow money, us … moreA type of loan that allows you to borrow money, using the value of a home you already own as collateral. Borrowers may either receive payment in a lump sum or on a monthly basis, and though what they borrow will accrue interest over time, repayment is not required until the borrower sells the home, moves, or passes away. That is the main differentiating factor between a reverse mortgage and a second mortgage, which requires regular monthly payments. Reverse mortgages are structured so as to prevent the value of the loan from exceeding that of the home during the loan's term.
More specifically, there are three types of reverse mortgages: 1) Single-purpose reverse mortgages -- The most affordable type of reverse mortgage, they are offered by state or local government agencies and non-profit organizations and may only be used for a designated purpose, such as home repairs; 2) Home Equity Conversion Mortgages -- Commonly known as HECMs, they are backed by the US Department of Housing and Urban Development, may be used for any purpose, and often charge high upfront costs; and 3) Propriety reverse mortgages -- Essentially the same thing as HECMs, they are offered by private companies and do not have federal backing.
To qualify for a reverse mortgage, you must be at least 62 and have significant equity in your home. Depending on the type of reverse mortgage you take out and the lender you use, there may be other requirements as well.
More specifically, there are three types of reverse mortgages: 1) Single-purpose reverse mortgages -- The most affordable type of reverse mortgage, they are offered by state or local government agencies and non-profit organizations and may only be used for a designated purpose, such as home repairs; 2) Home Equity Conversion Mortgages -- Commonly known as HECMs, they are backed by the US Department of Housing and Urban Development, may be used for any purpose, and often charge high upfront costs; and 3) Propriety reverse mortgages -- Essentially the same thing as HECMs, they are offered by private companies and do not have federal backing.
To qualify for a reverse mortgage, you must be at least 62 and have significant equity in your home. Depending on the type of reverse mortgage you take out and the lender you use, there may be other requirements as well.
The exact meaning varies based on the context in w … moreThe exact meaning varies based on the context in which it is used, but at its most basic, equity is the ownership stake one has in something.
In the context of home ownership, one's equity in a property is the difference between its current value and the amount remaining on the mortgage used to purchase it. If the mortgage has been paid in full, the homeowner has 100% equity. Real estate equity can be the basis for a number of different types of lending, including home equity loans, Home Equity Lines of Credit (HELOCs), and reverse mortgages.
In corporate accounting, shareholder equity is the combination of invested funds and retained earnings.
In the context of home ownership, one's equity in a property is the difference between its current value and the amount remaining on the mortgage used to purchase it. If the mortgage has been paid in full, the homeowner has 100% equity. Real estate equity can be the basis for a number of different types of lending, including home equity loans, Home Equity Lines of Credit (HELOCs), and reverse mortgages.
In corporate accounting, shareholder equity is the combination of invested funds and retained earnings.
A student loan that is not backed by the federal g … moreA student loan that is not backed by the federal government.
There are two primary types of private student loans: 1) School-channel loans -- Private loans that are approved by the borrower's school, generally have lower interest rates than other student loans, and which distribute funds directly to the school; and 2) Direct-to-consumer loans -- Loans that disburse funds to the borrower and limit the involvement of the respective financial institution to enrollment verification.
Private student loans are both similar to and different than federal student loans in a number of ways. While federal student loans have fixed interest rates, do not require a credit check for approval (since they're partially insured by the government), and have uniform rules regarding repayment issues, private student loans typically have variable rates (which makes one's monthly payments somewhat unpredictable), require an evaluation of the borrower's ability to repay amounts lent, and give the lender autonomy in raising rates or assessing penalties in the event of payment issues. Private student loans do not require repayment until after a borrower graduates either, unlike federal loans. There are also statutes of limitations that dictate the length of time during which you can be sued for private student loan debt, while federal student loans are never time-barred.
Private student loans and federal student loans are both exempt from bankruptcy protection, and missed payments for both are noted on your major credit reports.
There are two primary types of private student loans: 1) School-channel loans -- Private loans that are approved by the borrower's school, generally have lower interest rates than other student loans, and which distribute funds directly to the school; and 2) Direct-to-consumer loans -- Loans that disburse funds to the borrower and limit the involvement of the respective financial institution to enrollment verification.
Private student loans are both similar to and different than federal student loans in a number of ways. While federal student loans have fixed interest rates, do not require a credit check for approval (since they're partially insured by the government), and have uniform rules regarding repayment issues, private student loans typically have variable rates (which makes one's monthly payments somewhat unpredictable), require an evaluation of the borrower's ability to repay amounts lent, and give the lender autonomy in raising rates or assessing penalties in the event of payment issues. Private student loans do not require repayment until after a borrower graduates either, unlike federal loans. There are also statutes of limitations that dictate the length of time during which you can be sued for private student loan debt, while federal student loans are never time-barred.
Private student loans and federal student loans are both exempt from bankruptcy protection, and missed payments for both are noted on your major credit reports.
Insurance that covers the replacement value of cov … moreInsurance that covers the replacement value of covered items reimburses the insured party for the actual amount it will take to repair or replace damaged items. It is therefore usually preferable to "market-value insurance," which only provides for reimbursement up to the amount an item would fetch if sold, or "actual cash value" insurance, which depreciation from the time an item was purchased into account.
Loss of use coverage provides for the insured part … moreLoss of use coverage provides for the insured party to be reimbursed for costs incurred or earnings lost as a result of their inability to use insured property that has been damaged.
Loss of use coverage is particularly important for business owners as well as people living in areas that are under high risk for natural disasters. In the latter case, loss of use coverage may pay for hotel stays, transportation, food, and even one's mortgage.
Loss of use coverage is particularly important for business owners as well as people living in areas that are under high risk for natural disasters. In the latter case, loss of use coverage may pay for hotel stays, transportation, food, and even one's mortgage.
In the insurance world, an endorsement is an addit … moreIn the insurance world, an endorsement is an addition to a policy that changes the terms of the original policy in order to fill in a coverage gap, add additional coverage, or add new beneficiaries. Endorsements can be added upon the creation of a policy or long after it has been in effect.
A form of auto insurance coverage that reimburses … moreA form of auto insurance coverage that reimburses the insured party for medical expenses, lost wages, and other expenses incurred as a result of an accident. Personal injury protection is a type of "no-fault" coverage, as it is provided no matter who was at fault.
Personal injury protection (PIP) is required in 15 states. It is not available in all states, and in many states medical payments insurance (MedPay), which provides similar coverage, is offered instead.
Learn more about personal injury protection insurance.
Personal injury protection (PIP) is required in 15 states. It is not available in all states, and in many states medical payments insurance (MedPay), which provides similar coverage, is offered instead.
Learn more about personal injury protection insurance.
Coverage for damage to your own car caused by an a … moreCoverage for damage to your own car caused by an accident. This insurance will pay for repairs to your own car if your are at fault for an accident or if you're not able to get coverage from the at-fault driver's insurance. In most cases, collision insurance has a deductible.
Collision coverage is not required by law, but it will be required by your lender or leasing company if you finance the purchase of a car.
Read more about collision insurance coverage.
Collision coverage is not required by law, but it will be required by your lender or leasing company if you finance the purchase of a car.
Read more about collision insurance coverage.
A brokerage account in which an investor uses secu … moreA brokerage account in which an investor uses securities and cash holding as collateral for a loan from their broker. The borrowed money is then used to increase the size of your investment beyond your liquid spending power in order to magnify the potential profits.
The funds lent to an investor in a margin account accrue interest at a 3% - 8% rate until it is repaid. And, if the combined value of your securities and cash position falls too low, your broker may require to repay some of your debt in whatâ??s known as a â??margin call.â??
The funds lent to an investor in a margin account accrue interest at a 3% - 8% rate until it is repaid. And, if the combined value of your securities and cash position falls too low, your broker may require to repay some of your debt in whatâ??s known as a â??margin call.â??