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B&F Principle Unit 5
Banking and Finance Principles Unit 5
| Term | Definition |
|---|---|
| Adjustable Rate Mortgage | Mortgage with changing interest rate |
| Asset-Based Lending | Loan secured with the assets of a business |
| Balloon Mortgage | A mortgage in which the entire remaining balance of the loan is due in one single payment |
| Commercial Lending | Loans to business enterprises |
| Consumer Reporting Agency | Company that compiles and sells credit records |
| Credit worthiness | A creditor’s measure of an individual’s or company’s ability to meet debt obligations |
| Debt Ratio | Total obligations compared to total income |
| Debt Service Coverage Ratio | Comparison of net operating income to the total cost of debt |
| Equal Credit Opportunity Act | Prohibits the use of race, color, religion, national origin, marital status, age, receipt of public assistance, or exercise of any consumer right against a lender as a factor in determining creditworthiness |
| Escrow | An amount paid in advance to the lender from which the lender pays real estate taxes |
| Factoring | A form of lending that advances cash in exchange for a business’s receivables |
| Fair Credit Reporting Act | Guarantees consumers the right to review and dispute information in the reports |
| Fair Debt Collection Practices Act | Protects consumers from unfair collection techniques |
| Fair, Isaac and Company, Inc. (FICO) Score | A three-digit number that credit granters can use in making a loan-approval decision |
| Fixed Rate Mortgage | Loans with a fixed interest rate for the life of the loan |
| Foreclosure | The court-ordered sale of a property when the mortgage is not paid |
| Grace Period | Period for which no interest charges accrue if balance is paid in full by due date |
| Installment Loan | Loan with fixed amount of payments, rate of interest, and length of term |
| Lien | A legal claim to the property to secure the debt |
| Line of Credit | An arrangement in which a bank or vendor extends a specified amount of unsecured credit to a specified borrower for a specified time period |
| Loan to Value | Amount of loan divided by the property value |
| Mortgage | A note, usually long term, secured by real property. |
| PITI | Housing costs that the lender considers in the loan analysis and that are itemized on the monthly mortgage statement |
| Point | A value equal to one percent of the loan |
| Redlining | A discriminatory act whereby banks refuse to lend to residents of certain neighborhoods |
| Reverse Mortgage | A consumer loan tied to the appreciated value of a property |
| Secured Loan | A loan in which some item of value backs the loan in case the borrower defaults on the loan |
| Shared Appreciation Mortgage | A form of consumer lending that may lower interest rates for borrowers who agree to share later with the lender some part of the amount the house appreciates |
| Short-Term Loan | Financing for a year or less |
| Small Business Administration | Agency that offers financial, technical, and management programs to help businesses |
| Subprime Loans | Rate that is higher than normal to offset the increased risk represented by a less-than perfect borrower |
| Term Loan | Financing for permanent working capital, equipment, and real estate |
| Truth in Lending | Guarantees that all information about costs of a loan is provided in writing |
| Underwriting | Reviewing a loan for soundness |
| Unsecured Loan | Loan backed by only the reputation and creditworthiness of the borrower |
Created by:
enix
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