Personal Loan Glossary: 48 Lending Terms A to Z

Terms from A to C cover the cost and structure of a personal loan, from APR and amortization to credit reports and collateral. Each definition is written for everyday borrowers requesting Real Cash Loans Online.

Amortization

Amortization is the schedule that spreads a loan's principal and interest into equal payments over the term. Early payments go mostly to interest and later payments mostly to principal. An amortization table shows exactly how each payment is split.

Amount financed

The amount financed is the credit actually provided to you, after any prepaid fees are subtracted. If you borrow $2,000 with a $60 origination fee deducted, the amount financed is $1,940. It appears on your Truth in Lending disclosure.

Annual percentage rate (APR)

The APR is the yearly cost of a personal loan, including the interest rate and most fees such as an origination fee. Because it combines both, APR is the best single number for comparing offers. Real Cash Loans Online offers always state the APR before you sign.

Autopay

Autopay is an automatic payment drawn from your bank account on each due date. It helps you avoid late payments, and some lenders lower the APR slightly when you enroll.

Balloon payment

A balloon payment is a large final payment that is much bigger than the regular installments. Most personal loans do not have one; they are fully amortizing, so the last payment is about the same as the others.

Co-applicant

A co-applicant applies for a loan with you and shares full responsibility for repaying it. Adding a co-applicant with steady income or stronger credit can raise the amount offered or lower the rate.

Co-signer

A co-signer guarantees a loan without necessarily receiving the money. If the borrower does not pay, the co-signer must. Late payments appear on both people's credit reports.

Collateral

Collateral is property, such as a car, a savings account or sometimes household goods, pledged to secure a loan. If you default, the lender may take it. Most Real Cash Loans Online are unsecured and require no collateral.

Credit inquiry

A credit inquiry is a request to view your credit report. A soft inquiry has no effect on your score; a hard inquiry, made when you formally apply or accept, may lower it a few points for a short time.

Credit report

A credit report is a record of your accounts, balances and payment history kept by Equifax, Experian and TransUnion. You can view yours free at AnnualCreditReport.com and dispute errors.

Credit score

A credit score is a three-digit number, usually from 300 to 850, that summarizes your credit risk. Lenders use it with income and debts to decide whether to offer a personal loan and at what rate.

Credit utilization

Credit utilization is the share of your available card credit you are using. Keeping balances below about 30% of limits generally helps your score; paying cards down before you apply can improve offers.

Terms from D to I describe how lenders judge risk and handle problems, from debt-to-income ratio and default to hardship plans and installment loans. Several appear on every personal loan disclosure.

Debt consolidation

Debt consolidation means combining several debts, often credit cards, into one new loan with a single payment. A debt consolidation personal loan can lower the APR and set a fixed payoff date. Our debt consolidation guide explains the math.

Debt-to-income ratio (DTI)

Your debt-to-income ratio is your monthly debt payments divided by gross monthly income. Lenders generally prefer a DTI under about 36%; above 45%, they may lower the amount or decline the request.

Default

Default happens when you fail to repay a loan as agreed, usually after several missed payments. It can lead to collections, a damaged credit score and, for secured loans, loss of collateral.

Deferred interest

Deferred interest is a promotional feature where interest is postponed but charged retroactively if the balance is not paid in full by the promotion's end. It is common with store and medical financing, not with fixed personal loans.

Direct deposit

Direct deposit is an electronic transfer of loan funds into your checking account. Most lenders send the money this way, usually within one to two business days after you accept. Real Cash Loans Online are typically funded by direct deposit.

Direct lender

A direct lender is a company that makes and funds loans itself, the kind of company people mean by loans from actual lenders. We are not a direct lender; any offer through our form comes from a named lender, and our guide to loans from actual lenders explains the difference.

Due date

The due date is the day each payment must reach the lender. Many lenders let you change it once so it falls shortly after your paycheck arrives.

Finance charge

The finance charge is the total dollar cost of credit, including interest and most fees, over the full term. It appears in the Truth in Lending disclosure next to the APR.

Fixed rate

A fixed rate stays the same for the whole loan, so the payment never changes. Almost all personal loans through our network carry fixed rates.

Grace period

A grace period is a short window after the due date, often 10 to 15 days, before a late fee applies. Check your agreement, because grace periods differ by lender and state. Payments made in the grace period are usually not reported as late.

Hard inquiry

A hard inquiry is a credit check made when you formally apply for or accept credit, such as when you accept an offer for Real Cash Loans Online. It may lower your score slightly for a few months and stays on your report for two years.

Hardship plan

A hardship plan is a temporary change to your payments, such as a lower amount or a skipped month, offered when you face a job loss or emergency. Ask your lender early, before payments are missed.

Installment loan

An installment loan is repaid in a set number of equal payments over a fixed term. Most personal loans are installment loans; our installment loans guide covers how they work.

Interest rate

The interest rate is the yearly percentage charged on the outstanding balance, not counting fees. It is usually lower than the APR when the loan has an origination fee.

Terms from L to P cover fees, lender rules and the paperwork you will see, from late fees and licensing to prepayment and prequalification. Knowing them makes a personal loan offer much easier to read.

Late fee

A late fee is a charge added when a payment arrives after the due date and any grace period. It is not part of the APR. Late fees typically range from about $10 to $40.

Lender license

A lender license is permission from a state regulator to make consumer loans. You can check most lenders on NMLS Consumer Access or your state regulator's website.

Line of credit

A line of credit lets you borrow up to a limit, repay and borrow again, usually at a variable rate, and you pay interest only on what you use. A personal loan, by contrast, is a one-time lump sum with fixed payments.

Loan agreement

The loan agreement is the contract between you and the lender. It sets the amount, APR, payment schedule, fees and your rights. Read it fully before signing.

Loan term

The loan term is the length of time you have to repay, such as 12, 24 or 36 months, chosen when you accept the offer. Longer terms lower the payment but increase total interest.

Military Annual Percentage Rate (MAPR)

The MAPR is the cost measure used under the Military Lending Act. It caps most consumer credit for active-duty service members and their dependents at 36%, including many fees.

Origination fee

An origination fee is a one-time charge for processing a loan, usually 0% to 10% of the amount. It is often deducted from the funds you receive and is included in the APR.

Payoff quote

A payoff quote is the exact amount needed to close your loan on a specific date, including interest accrued since your last payment. Request one before paying a loan off early.

Personal loan

A personal loan is an unsecured installment loan you can use for most purposes, repaid in fixed payments. Real Cash Loans Online through our network are personal loans of $500 to $5,000.

Prepayment penalty

A prepayment penalty is a fee for paying a loan off early. Most personal loans have none, so paying early saves interest. Check the agreement for Real Cash Loans Online before making extra payments.

Prequalification

Prequalification is a quick review, usually with a soft credit check, that shows estimated offers. It does not affect your score and does not guarantee final approval.

Principal

Principal is the amount you borrowed and still owe, not counting interest or any fees. Extra payments applied to principal reduce future interest.

Terms from R to Z cover the final stages of borrowing, from refinancing and secured loans to the Truth in Lending disclosure and underwriting. They complete the vocabulary for comparing Real Cash Loans Online offers.

Refinancing

Refinancing means replacing an existing loan with a new one, usually to get a lower APR or a different term. It makes sense when savings outweigh any new fees.

Representative example

A representative example shows the cost of a typical loan, including APR, payment and total repaid. Our representative example is $2,000 over 12 months at 24% APR: about $189.12 a month and $2,269.44 in total.

Secured loan

A secured loan is backed by collateral, such as a car title or savings. Secured loans can carry lower rates, but you risk losing the collateral if you default.

Soft inquiry

A soft inquiry is a credit check that does not affect your score, used for prequalification and account reviews. Only you see soft inquiries on your report.

Total of payments

The total of payments is everything you will pay over the term if you pay on schedule, principal plus finance charge. It is the clearest number for comparing offers with different terms.

Truth in Lending disclosure

The Truth in Lending disclosure is a federally required summary showing the APR, finance charge, amount financed, total of payments and payment schedule. Every real lender provides one before you sign, and real online lenders show it on screen before you accept.

Underwriting

Underwriting is the lender's review of your credit, income, debts and identity to decide whether to lend and on what terms. Automated underwriting can finish in minutes.

Unsecured loan

An unsecured loan requires no collateral; approval rests on your credit and income. Most personal loans are unsecured, which is why rates depend heavily on credit.

Variable rate

A variable rate can change over time with a market index, which can raise or lower your payment. Credit cards and lines of credit often use variable rates; personal loans rarely do.

Verification

Verification is the step where a lender confirms your identity, income and bank account before funding. Uploading clear documents quickly is the easiest way to speed it up, and it is often what makes loans with same day funding possible.

Knowing the vocabulary helps you read any personal loan offer in minutes. Start with the APR, total of payments and amount financed, then check fees, the term and the prepayment rules.

When you request Real Cash Loans Online, every offer includes a Truth in Lending disclosure that uses many of these words. If something is unclear, ask the lender before you sign; real online lenders explain their terms in plain language. For worked examples, see our rates guide and personal loan calculator, and for common questions, our FAQ.