Loan terminology

adjustable rate (noun): Interest rate on a loan that can change over time based on market conditions. – They opted for an adjustable-rate mortgage.

annual percentage rate (noun): The yearly interest rate, including fees and charges, expressed as a percentage. – The loan’s annual percentage rate was 8.5%.

amortisation (noun): Gradual repayment of a loan through scheduled installments, reducing the principal over time. – The loan’s amortization period was 30 years.

anniversary date (noun): The date on which a borrower’s twelfth monthly payment is due. – Our anniversary date is August 16th next year.

annuity (noun): Series of fixed payments over time, often from an investment or insurance product. – He invested in an annuity for retirement income.

application fee (noun): A fee that is paid to a lender when submitting a loan application. – When we applied for our loan, we had to pay a £200 application fee. 

assets (noun): Personal property considered to be of value that can be used to pay off debts. – Among Sam’s assets were a car and several acres of land.

balloon loan (noun): Short-term loan with small installments and a large final payment. – They opted for a balloon loan to reduce monthly payments.

balloon payment (noun): Final lump sum payment due at the end of a balloon loan. – The borrower struggled to make the balloon payment.

bad debt (noun): Payments on a loan that are long overdue and no longer considered recoverable. – Most lenders consider bad debt to be part of the cost of doing business with customers.

benchmark interest rate (noun): Standard rate used to determine other loan interest rates. – The central bank set the benchmark interest rate.

borrower (noun): A person or business that takes out a loan. – If the borrower fails to meet any further repayments, we will be forced to take legal action.

bridge loan (noun): A sum of money lent by a bank for a short time to cover an interval between two transactions. – We applied for a bridge loan between buying our new house and selling our old one.

capitalisation (noun): Adding unpaid interest to the loan’s principal balance. – The loan’s capitalisation increased the total amount owed.

cash-flow financing (noun): A short-term loan based on expected future cash flow. – The company used cash-flow financing to cover expenses.

closing disclosure (noun): Document detailing the final loan terms and closing costs. – The borrower reviewed the closing disclosure before signing.

collateral (noun): Asset offered as security for a loan, subject to seizure if the borrower defaults. – The car served as collateral for the auto loan.

co-signer (noun): Person who pledges responsibility for a loan if the borrower defaults. – The loan was approved with a co-signer’s support.

credit (noun): The amount of money that a borrower is able to access. – Fortunately, Steve was able to access nearly £2,000 in credit.

creditor (noun): A person or company to which you owe money. – Jerry sold his house to pay off his creditors.

credit score (noun): An indicator based on a mathematical formula which indicates how likely a person is to pay back a loan on time. – With such a bad credit score, John’s loan application is unlikely to be approved.

current assets (noun): A company’s assets that can be converted into cash within a year. – Among the taxi company’s current assets are five new cars and a minivan. | The company used current assets as collateral for the loan.

current liability (noun): Debts due within a year. – The loan was recorded as a current liability on the balance sheet.

debt (noun): Money that a person or company owes. – Until I pay off this debt, I will not be taking any holidays.

debt service reserve (noun): A fund set aside to cover loan payments during financial difficulties. – The project required a debt service reserve.

deferred (adjective): Officially postponed or delayed. – The borrower asked to be allowed deferred loan payments.

delinquent (noun): The state of being late with one’s payments. – It is vital that we make our payments on time, or else we will be reported as delinquent.

direct lender (noun): Institution or person that provides loans directly to borrowers. – The bank acted as a direct lender for mortgage loans.

down payment (noun): An upfront payment that is made to secure funding towards a large purchase. – We made a down payment of £1000 on our new car and borrowed the rest.

due diligence (noun): Thorough investigation before entering a loan agreement. – The lender performed due diligence on the borrower’s financials.

endowment loan 1 (noun): A loan in which the borrower pays only the interest on their loan each month. – Our endowment loan enabled us to pay less than we would with a standard loan.

endowment loan 2 (noun): Loan backed by an endowment, often used in educational institutions. – The university received an endowment loan for campus expansion.

equity (noun): The total value of a mortgaged property after any money the borrower still owes has been deducted. – Mary’s total equity in her house is approximately £5000.

fixed rate (noun): An interest rate that does not change during the lifetime of a loan. – We agreed on a fixed rate of 13%.

grace period (noun): Timeframe granted to a borrower to make loan payments without penalties. – The bank allowed a ten-day grace period for loan repayments.

guaranteed loan (noun): Loan backed by a guarantor, ensuring repayment if the borrower defaults. – The government offered guaranteed loans to small businesses.

indirect lender (noun): Entity that facilitates loans through intermediaries like brokers. – The online platform acted as an indirect lender, connecting borrowers with investors.

interest (noun): The extra money that a person pays for borrowing money. – We pay a substantial amount of interest on our loan each year.

late fee (noun): A fee which a borrower is charged for being late with a payment. – Gloria had to pay a £200 late fee when she failed to make her payment on time.

leverage 1 (noun): Money that a person borrows for the purpose of investment. – We used our leverage to buy shares in a promising new company.

leverage 2 (noun): Using borrowed funds to increase potential returns. – The investor used leverage to finance real estate purchases.

liability (noun): Financial obligation or debt. – The loan became a liability on the company’s balance sheet.

licensed lender (noun): A person or company that has permission from the government to lend money. – We asked him to show us his documents to prove he was a licenced lender.

lien (noun): Legal claim on a borrower’s property as security for a debt. – The bank placed a lien on the house due to unpaid debts.

loan (noun): Money borrowed with an agreement to repay it, usually with interest. – Suzy obtained a loan to start her business.

loan agreement (noun): A contract between a borrower and a lender. – I keep a copy of my loan agreement in the top drawer of my desk.

loan default (noun): Failure to repay a loan as agreed. – The property was foreclosed due to loan default.

loan denial (noun): Rejection of a loan application. – We were all sympathetic when we heard about John’s loan denial.

loan officer (noun): Bank employee responsible for assisting customers with their loan applications. – The loan officer answered all our questions and helped us with the paperwork.

loan underwriting(noun): Evaluation of loan applications to assess risk and determine terms. – The loan underwriting process was thorough.

market rate (noun): Current prevailing interest rate in the financial market. – The loan’s interest rate was based on the market rate.

mortgage (noun): Loan to finance property purchase, secured by the property itself. – They applied for a mortgage to buy their dream home.

net working capital (noun): Current assets minus current liabilities. – The company used net working capital to assess its financial health.

origination fee (noun): Charge for processing a loan application. – The origination fee was added to the loan amount.

payday loan (noun): Short-term, high-interest loan that is processed quickly and due on the borrower’s next payday. – As soon as I receive my pay, I’ll pay back my payday loan.

personal loan (noun): Money borrowed for personal use, not tied to a specific purpose. – We opted for a personal loan as it suited our individual needs.

portfolio (noun): Collection of loans or investments held by an individual or institution. – The bank managed a diverse loan portfolio.

pre-approval (noun): Initial evaluation by a lender, indicating the maximum loan amount a borrower qualifies for. – She obtained preapproval before house hunting.

prime loan (noun): Loan offered to borrowers with the best credit scores. – Because of his high credit score, Max’s application for a prime loan was immediately approved.

principal (noun): Initial amount borrowed, excluding interest or additional fees. – So far Don has repaid about half of the loan’s principal.

promissory note (noun): Legally binding document containing loan terms and the borrower’s promise to repay. – The promissory note outlined the loan conditions.

receivables 1 (noun): Amounts that have yet to be repaid to a lender at a particular time. – The current sum of Adam’s receivables is close to £30,000.

receivables 2 (noun): Money owed to a company, often in the form of outstanding invoices. – The company used its receivables as collateral for a loan.

recourse (noun): Lender’s right to claim borrower assets if they default. – The loan agreement had full recourse.

refinancing (noun): Process of obtaining a new loan to replace an existing one, often to secure better terms. – He saved money by refinancing his home loan.

secured loan (noun): Loan backed by collateral to reduce the lender’s risk. – The car served as collateral for the secured loan.

student loan (noun): A loan taken out by a student to fund their higher studies. – Without a student loan, I wouldn’t have been able to afford university.

subprime loan (noun): Referring to loans offered to borrowers with less favourable credit histories. – The bank specialized in subprime lending.

title (noun): Legal ownership of an asset, often required for collateral-based loans. – The property’s title was transferred to the lender during the loan term.

title loan (noun): A loan that requires an asset as collateral. – Peter is using his Mercedes as collateral for his title loan.

underwriter (noun): A person responsible for assessing a borrower’s creditworthiness and risk before approving a loan. – The underwriter said that he’ll contact us as soon as the loan has been approved.

unsecured loan (noun): Loan without collateral, relying solely on the borrower’s creditworthiness. – The unsecured loan had a higher interest rate.

variable interest rate (noun): Loan interest rate that fluctuates with market changes. – The borrower faced uncertainty with a variable interest rate loan.