Acknowledgment: A declaration made by signing a written document before a notary public and/or another officer.

Actual Cash Value (ACV): The market value of your car.

Amortization: The reduction of debt by level fixed payments.

Annual Percentage Rate (APR): The APR shows the cost of a loan expressed as a yearly interest rate, including the interest and other fees associated with the loan. Because the APR includes up-front costs paid to obtain the loan, it is usually a higher amount than the interest rate stipulated in the note.

Application: The first step in the official loan process to gather and record information about the potential borrower.

Arrears: Payment made after it is due. Interest is paid in arrears therefore it is paid to the date of payment rather than in advance.

Bankruptcy: A federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.

Borrower: Person responsible for repaying a loan who has signed and agreed to the terms.

Budget: A detailed record of all income earned and spent during a specific period of time.

Capitalization: Adding unpaid interest to the loan principal. Capitalization increases the principal amount of the loan and its total cost.

Collateral: Property pledged as security for a loan to ensure repayment of a loan.

Commitment: A written promise also known as a note to make or insure a loan for a specific amount for specific items.

Co-Signer: A person, other than the borrower, who signs the promissory note as a back up for repayment on the loan. The co-signer is pursued for collection on the loan if the borrower fails to fulfill his repayment obligations.

Credit Agencies/Credit Bureaus: Organizations or programs that collect individual credit information and provide credit reports to potential lenders and borrowers.

Credit History: The history of an individual's debt repayment. For most types of loans, lenders use this information to gauge a potential borrower's ability to repay a loan.

Credit Rating: A grade assigned to denote the net worth and credit standing of an individual or a business.

Credit Report: A record that lists all past and present debts and the timeliness of their repayment, and documents an individual's credit history.
 
Debt: Amount owed to another that must be repaid.

Debt-To-Income Ratio: The relationship between the consumer's monthly debt payments and monthly income, expressed as a ratio. Lenders will often set a maximum debt-to-income ratio and usually do not make loans to consumers whose ratios exceed the lender's standard.

Default: The failure to repay a loan according to the terms of the loan.

Deferment: A deferment is a temporary suspension of a borrower's monthly loan payment. There are many different types of deferments available.

Delinquency: Failure of a borrower to make a timely payment on a loan.

Disbursement: Payment of loan proceeds by the lender. During consolidation, this term refers to sending payoffs to the loan holders of the underlying loans being consolidated.

Disclosure Statement: Statement of the actual cost of a loan, including accrued interest, assessed fees and the number of payments.

Forbearance: A postponement of payments or a reduction in monthly payments for a limited and specified period of time during which a borrower is willing but unable to make payments.

Forgery: The making or alteration of a document or instrument with the intent to defraud.

Gross Monthly Income: The income you earn in a month before taxes and other deductions. Under certain circumstances, it may also include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.

Interest: A fee charged for the use of money. 
 
Interest Rate: The amount of interest charged on a loan, usually expressed as a percentage.

Lease/Purchase: Often used interchangeably, but means a lease arrangement made in conjunction with a purchase agreement. 

Lender: The entity that provides loan funds to the borrower. Depending on the type of loan, the lender may be a bank or other financial institution, or a government agency. 

Loan: Money borrowed that must be repaid.

Loan Applicant: The party applying to the lender (in the case of guaranteed loans) for a guaranteed loan or the party applying for a loan (in the case of direct loans). 

Note: The binding legal document you sign when you get a loan.

Principal: The loan amount borrowed from a lender, not including interest or additional fees. 

Principal Balance: The amount owed on a loan or loans at any given time. The principal balance may include capitalized interest.

Promissory Note: A legally binding contract between a lender and a borrower. The promissory note contains the terms and conditions of the loan, including how and when the loan must be repaid.

Recourse Note: A note which the holder can look personally to the individual borrower or borrowers for payment.

Refinancing: The repayment of a loan from the proceeds of a new loan. This is done by using the same property as collateral. 

Repayment Period: The period during which a borrower is obligated to make payments on his or her loan(s).

Replacement Cost: The cost to replace damaged personal property without a deduction for depreciation.

Servicer: An organization that collects loan payments on behalf of a lender.

Specific Performance: An action to require a specified performance based upon a contract.

Split Deposit: A deposit in which a portion is credited to the depositor's account and the balance is taken in cash.

Term: The time limit within which a loan must be repaid. 

Unsubsidized Loan: A loan for which a borrower is fully responsible for paying the interest regardless of the loan status. Interest on unsubsidized loans accrues from the date of disbursement and continues throughout the life of the loan.

Verification Certification: The process by which a consolidation lender requests that a loan holder certify a loan's payoff balance.

Warranties: Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.

Wire Transfer: The transfer of funds to another location through a correspondent bank by telephone or telegraph.