Financial Aid Glossary
Accrued
Interest
Interest earned but not yet paid
Annual
Percentage Rate (APR)
The cost of credit expressed as a yearly rate.
The annual percentage rate is often not the same
as the interest rate. It is a percentage that
results from an equation considering the amount
financed, the finance charges, and the term of
the loan.
Credit
Rating
For individuals, credit risk is based on your
financial resources and credit history. Your total
debt level, timeliness in paying credit cards,
and many other factors are taken into consideration.
Credit bureaus use credit scoring to quantify
to potential creditors how likely you are to pay
back a loan.
Credit
Score
A number that indicates an individual's creditworthiness.
Credit bureaus determine the score with a statistical
program. You are given points for such things
as your credit card debt, number of cards, total
debt level, and whether you rent or own your own
home. Delinquencies, collection accounts, and
charged-off accounts area also factored into this
score. Even the number of inquiries from potential
creditors can affect your score because a number
of inquiries may signal credit problems. Creditors
use the score to decide whether to give you a
mortgage, issue a credit card, or offer a small
business loan. A good score can result in a lower
interest rate; a poor score can mean you will
be charged a higher interest rate or denied a
loan.
Disclosure
Statement
A written explanation of the rates, fees, and
terms of a specific loan based on the borrowers
qualifications
FICO
The most common credit-scoring model used by lenders,
it is also known as a Fair Isaac score. A FICO
score can range from 200-900. According to this
model, the higher your score, the less likely
you are to default on a loan.
Finance
Charges
Interest charged on loans made to you. For example,
the interest rate on a credit card or the interest
rate on a student loan is a finance charge.
Interest
Charge paid for borrowing money, calculated as
a percentage of the remaining balance of the amount.
Interest
Rate
The annual rate of interest on the loan, expressed
as a percentage of 100. The rate used to calculate
the monthly payment and finance charge of a loan
Note
Legal document obligating a borrower to repay
a loan at a stated interest rate during a specified
period of time.
Prime
Rate
The interest rate that banks use in pricing loans
to their most creditworthy customers
Supplemental
Fee
The fee lenders charge a borrower to protect themselves
against the risk of bad debt. |
