Glossary of Payday Loan

Anyone seriously considering a payday loan or cash advance should learn a few basic financial terms bound to come up in the transaction. Familiarizing yourself with these terms will go a long way to understanding the financial community. These are not specialized jargons.

In fact, most of these words have entered the vocabulary of common languages in almost all countries specially the English-speaking ones.

Amortize

Loan payment in installments with a fixed amount and scheduled due dates.

Appreciation

As opposed to depreciation, this is the gained value of an asset over a time period.

Annual Percentage Rate (APR)

Or Interest Rate. The annual rate a consumer incurs on borrowing loan. APR is calculated in percentage. For example, a $75 due charge for the borrowed $1,000 has an APR of 7.5%.

Asset

Items that you own which are of market value.

Basis Point

In an investment, this is the one-hundredth of 1 percent.

Blank Check

When purchasing a new or used vehicle, this is the check given by the lender to the loan recipients. The check is blank which makes for it convenience and flexibility but the check is only valid up to a certain amount agreed upon. Loan recipients are not obliged to use the check if they change their mind about purchasing.

Collateral

If the loan recipient is unable to repay, these are the assets that the lender acquires from the former. For a property loan, the collateral is the property itself.

Default

Failure to pay loan on the maturity date.

Depreciation

As opposed to appreciation, the devaluing of an asset over a period of time.

Equity

The property’s value after the loan amount is subtracted.

Interest

The amount imposed by the payday loan lender on an approved loan.

Liabilities

Money owed by a consumer.

Lien

This is the legal claim on a property until the financial obligation is paid.

Liened Property

A property which has a financial obligation due. The property’s Certificate of Title lists the borrower as the registered owner and the lender as the lien holder.

Lien-Free

A property owned by an individual and has no outstanding loan obligations.

Loan-To-Value Ratio

This is the relationship—expressed in percentage—between the appraised property value and the loan amount.

Monthly Payment

On a monthly basis, this is the principal amount plus interest paid for a loan.

Negative Equity

The amount of your loan is bigger than the property value you made as loan collateral.

Net Worth

The value of a person’s assets minus his liabilities.

Principal

The borrowed loan amount.

Simple Interest

Between principal and interest, this is the method by which monthly payments on a loan is allocated. The payment amount allocated to interest is calculated based on a borrower’s principal balance that remains unpaid, the rate of interest on the cash advance loan and the number of days since the last scheduled payment.

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