At Cash Factory USA, we want you to be on top of everything when it comes to budgeting and saving. To ensure you understand exactly what our services, our blogs, and our advice columns are all about, we created a glossary to help define all the terms we frequently use. Explore the definitions below and use them to help you make better financial decisions.
Annual Percentage Rate (APR): This term refers to the interest owed on a particular amount of money. It could refer to the amount of interest you owe on a loan or the amount of interest a bank gives you on a savings account. APR ranges from loan to loan and account to account. You can expect the APR on a payday loan to be slightly higher than those on other loans.
Auto Title Loans: An auto title loan is a secured loan that utilizes your car as the collateral. You need to give the title of your car to the lender and if you don’t repay your loan, the lender keeps your car. Many places allow you to keep using your car as long as your payments are in good standing.
Bounced Check: If there aren’t sufficient funds in your account, any check that you write will overdraw the account. The check won’t be honored and you will incur extra overdraft feeds.
Cash Advance Loan: A type of payday loan. This is a short-term loan that typically requires repayment by your next paycheck.
Collateral: This is an item of similar or greater value to your loan amount. It is used to secure your loan and will be forfeited if you default on your payments.
Collections: If you fail to repay your loans, the lender will send your account to a different part of their business or to a third party in an attempt to collect the money.
Compound Interest: When you take out a loan, instead of accruing interest only on the original amount of your loan, the interest from each month is added to the principal amount and is subject to the interest rate.
Credit Check: Before a lender loans you money, they check your credit score to ensure your reliability before issuing a loan. Payday lenders don’t typically conduct a credit check.
Debt: Any borrowed money that is owed to another person or business.
Default: When you don’t make payments on your loan for an extended period or you stop trying to pay back the loan altogether.
Deferred Deposit: Postdating a check with a future date, so it cannot be deposited until that time. Also known as a post-dated check.
Direct Deposit: Depositing money from an institution or business directly into a bank account.
Direct Payday Lender: Any business or individual that can provide the money directly to a borrower. No third parties or banks are involved.
Electronic Transfer: Moving money between accounts electronically online or by phone.
Federal Deposit Insurance Corporation (FDIC): This organization is a protective institution that examines and supervises American financial institutions, including banks, payday lenders, investment firms, and wealth management companies.
Loan: Money borrowed from a person or business that must be paid back with interest or fees.
Loan Fees: Additional charges other than the amount of money and interest you owe on the initial loan amount. It can include late fees, money transfer fees, and transaction fees.
Maturity Date: The deadline for the repayment of a loan.
Maximum Loan Amount: Payday lenders factor in your salary, reliability, and other expenses to calculate the maximum amount of money they can lend you.
Payday Installment Loans: Loans that are similar to payday loans, but often offer a larger principal amount and a longer time to pay off the loan. Includes a payment plan.
Payday Lender: A business that deals in short-term loans — primarily payday loans that must be repaid by the next paycheck.
Payday Loan: A short-term loan based on your paycheck with an agreement that the borrower repays it by the next paycheck plus any interest or fees.
Postdated Loan: A payday loan that requires a post-dated check as collateral.
Principal: This is the initial amount of your loan. APR accrues on this amount while compound interest accrues on the initial amount plus the added interest for each month.
Proof of Income: Bank statements or pay stubs that show evidence of a job, social security, or disability payments.
Risk-Based Pricing: An adjustable interest rate based on the risk of lending to a specific individual. High-risk individuals end up with higher interest because there is more of a chance that they won’t repay the loan.
Secured Loan: Any loan that has collateral (often a car) as backup. The collateral is forfeit if a borrower cannot repay their loan.
Short-Term Loan: A type of loan that is designed to give a small amount to the borrower and should be paid back within a short time period.
Simple Interest: Interest is only accrued on the principle. The opposite of compound interest.
Uniform Small Loan Law (USLL): Protective laws governing loan agencies and banks to ensure consumers aren’t victimized by dangerous or predatory loans. These laws dictate caps for APRs and indicate the maximum loan amount in certain cases.
Unsecured Loan: Any loan that is based on a person’s credit score and reliability instead of collateral.
Usury Laws: These are local and state laws that protect consumers with limits on APR.
Wage Garnishment: If you have debt that must be repaid, many courts will mandate an amount pulled directly from your paycheck and sent to the lender. Wage garnishment is often a solution for those who default on payday loans.
With the Cash Factory USA definitions, you now understand all the technical terminology we use when we discuss loan terms and financial goals. Reach out to us today to learn more about our services and discuss your options.