A B C D E F G H I K L M N O P Q R S T U V W X Y Z

401(k) – A Plan where the employee has a portion of their wages deposited, or “deferred,” into a pretax account (the 401K account) where money is held for retirement. In the meantime, they earn interest (depending on the economy) and the employee does not have to pay taxes on them until withdrawn. If withdrawn early, a penalty may be incurred.

A

Adjustable Rate (Variable Rate) – An interest rate on a loan, or line of credit, that changes over time. Usually the rate is based on the Wall Street Journal Prime Rate or a similar index.
Amortize – The total amount of a loan (and any charges) is divided by the total number of payments (i.e. – 36 if a 36 month loan) to be made. Each payment is for equal amounts and once all payments are made, there is no balance- the loan is considered paid.
Annual Percentage Rate (APR) – Finance charge on a loan for a full year, expressed as a percentage.
Annual Percentage Yield (APY) – Rate of return if savings are held over a full year, expressed as a percentage.
Asset – Anything that adds to your monetary worth.

B

Buydown – A mortgage-financing technique where the buyer attempts to obtain a lower interest rate by having the builder or seller of the property provide payments to the mortgage-lending institution.

C

Certificate of Deposit (Share Certificate) – CDs are similar to savings accounts in that they are insured and thus low risk; they are “money in the bank” (CDs are insured by the FDIC for banks and Share Certificates are insured by the NCUA for credit unions). They are different from savings accounts though in that they have a specific, fixed term (often three months, six months, or one to five years), and, usually, a fixed dividend rate. It is intended that the certificate be held until maturity when the money deposited and the dividends earned may be withdrawn. There are sometimes penalties for withdrawing the money before the time is up.
Checking Account (Share Draft) – A checking account is a deposit account where you deposit funds for later withdrawal. You may withdraw money using your debit card; online payments, ATMs (for cash withdrawals), a walk up teller and yes, there are still the old fashioned paper checks. Typically there is no limit to the number of transactions you can make.
Collateral – A property (usually a home or vehicle) fully owned by you that you agree to relinquish to a lender in the event you cannot repay your debt.
Compound interest – The concept of adding accumulated interest back to the amount being assessed a finance charge. A loan, for example, may have its interest compounded every month. If this were the case, a loan with $100 principal and 1% interest per month would have a balance of $101 at the end of the first month so that the next month 1% interest would accrue on a $101 balance.

D

Default – The failure to make a payment as agreed.
Discretionary Income – What remains of your take home pay, after essential living costs are paid.
Dividend – Interest paid on deposits.
Dormant Account – An account in which there has been no member activity for a specified period of time.
Draw Period – The period of time that you may access funds.

E

Equity – The difference between what the item (home or car) is worth and what you owe the bank on your loan.
Escrow, Escrow Account – A side account where funds are held to pay for any additional costs (for mortgages, this is most commonly homeowners insurance and property taxes) until the loan is paid off.

F

Finance Charge – The amount of interest that is accrued on a loan. This is the fee for borrowing form a lender.
Fixed Rate – An interest rate on a loan, or line of credit, that does not change over time.
Foreclosure – A legal process where property, typically a mortgage, is sold to payback a defaulted loan.

G

GAP, Guaranteed Asset Protection * – A product that covers the difference between an insurance settlement and a loan balance (for those items directly related to the purchase of the vehicle) on a vehicle that is stolen, accidentally damaged beyond repair, or otherwise declared an insurance loss.
*Guarantor – A person who promises to answer for the debt or default of another.

H

HELOC, Home Equity Line of Credit – A revolving line of credit, much like a credit card, where the limit is based on the equity in your home.
Home Equity loan (sometimes abbreviated HEL) – A type of loan where the borrower uses the equity in their home as collateral.

I

IRA, Individual Retirement Account – Much like a 401(K), except that the money deposited is already taxed so that when you withdraw it during retirement, there are no taxes due. There are multiple types of IRAs.
Interest Rate – The rate you are charged when you borrow money. The cost of borrowing expressed as a percentage.

J

Joint Account – Where two or more people are accountholders on the same account.
Joint Tenancy – A legal term meaning that two or more people own an asset together and yet have equal individual rights to it.
Jumbo Mortgage – A mortgage with a loan amount above the industry-standard definition of conventional conforming loan limits (currently, $417,000- $2,000,000). .

K

Kelley Blue Book – An automotive vehicle valuation company. The company’s website is a valuable resource for new and used vehicle pricing and information.

L

Liability – Anything that detracts from your monetary worth.
Lien – A restriction on the ownership of a property until the debt is completely paid.

M

Member (Credit Unions only) – A person holding at least one credit union share account. Each member has the opportunity to receive credit union financial and related services and has a right to one vote at the annual meeting.
Mortgage – A loan that is made to purchase a property, such as a home or plot of land. The lender owns the property until all payments are received.

O

Outlet Malls – A great place to buy things AND stay on budget

P

Par Value – The dollar amount an item would sell for, if sold in today’s market.
Principal – The actual amount of a loan before finance charges and other charges are added or deducted.

R

Repayment Period – The time period in which you can no longer withdraw money from your loan, you may only make payments.
Repossession – The taking back of the property (usually an auto) for which you have defaulted.
Routing Number, ABA Routing and Transit Number – The routing and transit (ABA) number is the first nine-digits found on the bottom of a check or deposit slip. It is often used in electronic payments to identify your bank or credit union.

S

Secured Credit – Credit which is backed by assets owned by the borrower in order to decrease the risk assumed by the lender.
Security Interest – The right for the lender to repossess the item being purchased if payment is not made.
Share – A given amount of money a person deposits with a credit union to become a member.
Share Account (Savings Account) – A deposit account with a credit union that earns dividends on its balance. Due to federal regulations, no more than 6 withdrawals per month may be made on this type of account.
Share Certificate (Certificate of Deposit) – See Certificate of Deposit
Share Draft Account (Checking Account) – See Checking Account
Share Insurance – Insurance that protects a credit union member’s savings against losses up to $250,000 on each account. This insurance is provided through the credit union as backed by their charter from the National Credit Union Administration (NCUA)

V

Variable Rate (Adjustable Rate) – An interest rate on a loan, or line of credit, that changes over time. Usually the rate is based on the Wall Street Journal Prime Rate or a similar index.