Amortization
Paying off a loan through regular, equal installments that cover both interest and principal. Early payments go mostly to interest; later payments go mostly to principal, until the balance reaches zero.
See an amortization schedule →- Home
- Glossary
Loan & credit glossary
Loan Terms, Explained Simply
68 borrowing and credit terms in plain English, from APR to underwriting. Each entry links to a deeper guide where we have one.
A
Amount financed
The amount of credit you actually receive, after any prepaid finance charges such as an origination fee are subtracted. It appears on your Truth in Lending disclosure next to the APR and finance charge.
See a worked example →Annual percentage rate (APR)
The yearly cost of borrowing, including the interest rate and most required fees, shown as a percentage. Under the Truth in Lending Act, lenders must disclose the APR before you sign, which makes it the fairest number for comparing offers.
Compare average APRs →Application fee
A charge some lenders collect for processing an application. Federal credit union payday alternative loans (PALs) cap it at $20. Be wary of any lender that demands a fee before you receive a loan.
Spot upfront-fee scams →Autopay discount
A small rate reduction, often 0.25 to 0.50 percentage point, that some lenders offer when you set up automatic payments from your bank account.
B
Balance transfer
Moving a credit card balance to another card, often at a promotional low or 0% rate for a set period. Transfers usually carry a fee, commonly a percentage of the amount moved.
Compare with a consolidation loan →Bankruptcy
A federal court process that can wipe out or restructure debts. A Chapter 7 bankruptcy can stay on your credit report for up to 10 years and makes new credit harder and more expensive to get.
Buy now, pay later (BNPL)
A short-term installment plan offered at checkout that splits a purchase into a few payments, often four payments over six weeks. Many plans charge no interest if paid on time but may charge late fees.
C
Cash advance app
A phone app that lets you borrow a small amount against your next paycheck, often for an optional tip, subscription or instant-transfer fee. Those fees can add up to a high effective cost on a small, short loan.
Compare small-dollar options →Charge-off
An accounting step a lender takes when it decides a debt is unlikely to be repaid, usually after about six months of missed payments. You still owe the debt, and the charge-off can stay on your credit report for up to seven years.
Co-signer
A person who signs a loan with you and agrees to repay it if you don’t. A co-signer with strong credit can help you qualify or get a lower rate, but the debt also appears on their credit report.
Collateral
Property you pledge to secure a loan, such as a car or savings account. If you don’t repay, the lender can take the collateral. Most personal loans are unsecured and need no collateral.
Collection account
A debt that a creditor has sent to an internal collections department or sold to a debt collector after missed payments. Collection accounts can lower your credit score.
Consumer Financial Protection Bureau (CFPB)
The federal agency that writes and enforces many consumer finance rules and takes complaints about lenders, credit bureaus and debt collectors at consumerfinance.gov/complaint.
Credit bureau
A company that collects credit histories and sells credit reports. The three nationwide bureaus are Equifax, Experian and TransUnion.
How bureaus feed your score →Credit counseling
Free or low-cost help with budgeting and debt from a nonprofit agency. Counselors can review your situation and may offer a debt management plan. The National Foundation for Credit Counseling (NFCC) lists member agencies.
Credit freeze
A free block you place at each credit bureau so that new creditors can’t pull your report. It helps prevent identity thieves from opening accounts in your name. You can lift it temporarily when you apply for credit.
Protect yourself from fraud →Credit limit
The maximum amount you can borrow on a revolving account, such as a credit card or line of credit.
Credit report
A record of your credit accounts, payment history, balances, inquiries and certain public records. You can get free reports from each bureau at AnnualCreditReport.com.
Read your credit report →Credit score
A three-digit number, typically from 300 to 850 for FICO and VantageScore models, that estimates how likely you are to repay debt. Lenders use it to decide whether to approve you and at what rate.
Credit score ranges explained →Credit union
A nonprofit, member-owned financial cooperative. Credit unions often charge lower average rates on personal loans than banks, but you usually need to become a member first.
Credit unions vs. banks →Credit utilization
The share of your available revolving credit that you’re using. A $1,500 balance on a $5,000 limit is 30% utilization. Lower utilization generally helps your score.
What moves your score →D
Debt consolidation
Combining several debts, often credit cards, into one new loan with a single monthly payment, ideally at a lower interest rate.
When consolidation saves money →Debt settlement
Negotiating with creditors to accept less than you owe, often through a for-profit company that charges fees. It can seriously damage your credit, and forgiven debt may be taxable.
Debt-to-income ratio (DTI)
Your total monthly debt payments divided by your gross monthly income, shown as a percentage. Lenders use it to judge whether you can afford another payment.
Calculate your DTI →Default
Failing to repay a loan as agreed. The point at which a loan is considered in default is set by the loan agreement and can lead to collections, a charge-off and damage to your credit.
Delinquency
Being late on a payment. Lenders typically report an account to the credit bureaus as delinquent once a payment is 30 days past due.
Disbursement
The release of loan funds to you or, for some consolidation loans, directly to your creditors.
E
Equal Credit Opportunity Act (ECOA)
A federal law that bars lenders from discriminating against applicants based on race, color, religion, national origin, sex, marital status, age, receipt of public assistance, or good-faith exercise of consumer rights.
F
Fair credit
A credit score range that lenders often place around 580 to 669 on the FICO scale. Borrowers with fair credit can usually still find offers, but at higher rates.
Options for fair credit →Fair Credit Reporting Act (FCRA)
A federal law that governs who can see your credit report and why, and gives you the right to dispute inaccurate information and to be told when information in your report was used against you.
Fair Debt Collection Practices Act (FDCPA)
A federal law that limits how third-party debt collectors can contact you and bans harassment, false statements and unfair practices.
Finance charge
The total dollar cost of credit, including interest and certain fees. Lenders must disclose it under the Truth in Lending Act.
Fixed rate
An interest rate that stays the same for the life of the loan, so your payment doesn’t change. Most personal loans have fixed rates.
G
Grace period
Time after a due date during which you can pay without a late fee, or for credit cards, the period during which new purchases don’t accrue interest if you paid the prior balance in full.
H
Hard inquiry
A credit check made when you formally apply for credit. It can lower your score by a few points and stays on your credit report for two years.
Soft vs. hard checks →Home equity line of credit (HELOC)
A revolving line of credit secured by your home. Rates are usually variable and lower than unsecured loans, but you could lose your home if you can’t repay.
HELOC vs. personal loan →I
Identity theft
When someone uses your personal information, such as your Social Security number, without permission to open accounts or borrow money. Report it at IdentityTheft.gov.
Warning signs →Installment loan
A loan repaid in a set number of scheduled payments, usually monthly. Personal loans, auto loans and mortgages are installment loans.
How personal loans work →Interest rate
The percentage a lender charges to borrow money, not counting fees. It is usually lower than the APR when the loan has fees.
Interest rate vs. APR →L
Late fee
A charge for a payment received after the due date or grace period. The amount is set in your loan agreement and may be limited by state law.
Lead generator
A business that collects consumers’ loan requests and passes them to lenders, which may pay for the referral. Riverstone Lending App operates as a loan marketplace in this way and is not a lender.
How Riverstone works →Lender
The company that approves a loan, sets its rate and terms, funds it and collects payments.
Line of credit
A revolving account that lets you borrow up to a limit, repay and borrow again. You pay interest only on what you use.
Loan term
The length of time you have to repay a loan, usually stated in months. A longer term lowers the monthly payment but increases total interest.
Compare terms →M
Military Lending Act (MLA)
A federal law that caps the Military Annual Percentage Rate at 36% for most consumer credit to active-duty servicemembers and their covered dependents, and bans mandatory arbitration and prepayment penalties on covered loans.
Rate caps and your rights →Minimum payment
The smallest amount you must pay on a credit card or line of credit each month to keep the account in good standing. Paying only the minimum can stretch repayment out for years.
Card payoff calculator →N
NMLS
The Nationwide Multistate Licensing System, used by state regulators to license many lenders and brokers. You can check a company’s licenses at NMLSConsumerAccess.org.
How to check a lender →O
Origination fee
A one-time charge for processing a loan, usually a percentage of the amount borrowed and often deducted from the money you receive. It is included in the APR.
How fees change your APR →P
Payday alternative loan (PAL)
A small-dollar loan offered by some federal credit unions with an APR capped at 28% and an application fee of no more than $20. PAL I loans run $200 to $1,000; PAL II loans run up to $2,000.
Small-dollar loan rates →Payday loan
A short-term loan, often $500 or less, typically due in full on your next payday. A typical fee of $15 per $100 borrowed for two weeks works out to an APR of almost 400%.
Cheaper alternatives →Personal loan
An installment loan, usually unsecured, that you can use for most purposes, repaid in fixed monthly payments over a set term.
Personal loans explained →Prepayment penalty
A fee some lenders charge if you pay off a loan early. Many personal loans have none; check the loan agreement before you sign.
Prequalification
An early look at whether you might qualify and at what rate, usually based on a soft credit check that doesn’t affect your score. It isn’t a guarantee of approval.
Request offers →Prime rate
The benchmark rate many banks use to set variable rates on credit cards and lines of credit. Major banks raised it to 7.00% effective September 17, 2026.
Track the Fed and prime →Principal
The amount you borrow, or the part of your balance that is not interest or fees.
Promissory note
The signed agreement in which you promise to repay a loan under stated terms.
R
Rate shopping
Comparing offers from several lenders. Prequalifying with soft checks lets you compare without affecting your score.
Compare today’s rates →Revolving credit
Credit you can borrow, repay and borrow again up to a limit, such as a credit card. Balances and payments can change each month.
Rollover
Extending a payday loan by paying a new fee instead of repaying the balance. Each rollover adds fees while the original amount stays owed.
Avoid debt traps →S
Secured loan
A loan backed by collateral, such as a car or savings account. Secured loans often have lower rates because the lender can take the collateral if you don’t repay.
Soft inquiry
A credit check that doesn’t affect your score, such as when you check your own credit or prequalify for an offer.
Soft vs. hard checks →T
Total of payments
The full amount you will have paid once you make every scheduled payment, including principal, interest and finance charges. Lenders disclose it under the Truth in Lending Act.
Estimate your total →Truth in Lending Act (TILA)
A federal law, implemented by Regulation Z, that requires lenders to disclose the APR, finance charge, amount financed and total of payments before you’re bound by a loan.
Reading your disclosures →U
Underwriting
The lender’s review of your application, including credit, income, debts and identity, to decide whether to approve the loan and on what terms.
Unsecured loan
A loan with no collateral. The lender relies on your credit and income, so rates are usually higher than for secured loans. Most personal loans are unsecured.
How personal loans work →Usury law
A state law that caps the interest rate lenders can charge on certain loans. Caps and exemptions vary widely by state and loan type.
State rate caps →V
Variable rate
An interest rate that can change over time, usually tied to a benchmark such as the prime rate. Credit cards and HELOCs commonly have variable rates.
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