Payday Loans
Glossary
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Payday Loans Glossary
Annual percentage rate (APR): This number, takes into account all the finance charges, and represents the annual cost of credit or the interest rate charged on a loan. The Federal Truth In Lending Act makes sure payday lenders to conspicuously disclose the APR to prospective borrowers.
Bad credit: This refers to a low FICO score or a poor credit rating resulting from a borrower's negative payment history (i.e. defaults, late payments), outstanding debts, bankruptcy filings, and/or other credit-tarnishing circumstances. Lenders view bad credit borrowers as high risk in terms of future payment obligations.
Bankruptcy: A federal court proceeding whereby a consumer's debts are wiped out and his or her assets are sold.
Payday loan: Also known as a payday loan this short-term loan which is generally in the range of $100-$1000 serves as an emergency source of funding for individuals who need to bridge the financial gap until the next payday. Cash advance loan providers typically require customers to be at least 18 years of age and steadily employed and to have an active bank account.
Collateral: Also known as security, collateral refers to assets such as a borrower's car or home that are pledged to a creditor as assurance of debt repayment. In the event of default by the borrower, the lender may sell off the assets to satisfy the debt.
Community Financial Services Association of America (CFSA): Through its Best Practices, this national organization protects the public by ensuring that the payday loan industry operates responsibly and that consumers can avail themselves of viable and safe, short-term loans.
Credit check: To determine a prospective borrower's creditworthiness, payday loan lenders may conduct credit checks by requesting detailed reports from one or several of the leading credit bureaus- namely Experian, TransUnion, and/or Equifax. A credit check involves an examination of the borrower's bank statements and credit report, which contains the latter's payment history and indebtedness.
Credit history: This constitutes a report of a borrower's employment record, loan repayment behavior, available credit lines, present and past addresses, and risk factors such as bankruptcy or late payments. National credit bureaus such as Experian, Equifax, and TransUnion record borrowers' credit histories in the credit reports they issue.
Credit report: This is a summary of a borrower's credit history (i.e. outstanding debts, available credit), credit inquiries, and public records such as court judgments or bankruptcy filings. The credit report, which also provides identifying information about the borrower, such as name, Social Security number, phone number, and address, enables lenders to assess creditworthiness and set an applicable interest rate.
Credit reporting agency (CRA): Also known as credit bureaus, CRAs gather information about borrowers, such as credit history, tabulate their credit rating, and create credit reports for lenders. The three major credit reporting agencies in the U.S. are Equifax, TransUnion, and Experian.
Credit score: Also referred to as FICO or a credit rating, this three-digit number which typically ranges from 300 to 850, is a measure of a borrower's creditworthiness based on payment history, balances, and outstanding debts. A credit score may be generally classified as excellent, good, fair, or poor.
Creditworthiness: A determinative factor for payday lenders on a borrower's willingness and likelihood to repay a payday loan or credit extended to her.
Debt Management Company: This credit counseling agency offers people an extensive line of services, such as budget planning, consumer education courses, and debt management plans to assist delinquent borrowers in paying off several of their bills. Debt management companies negotiate with creditors to lower interest rates and monthly payments, reduce calls requesting payment, and cancel late fees.
Default: This occurs when a borrower fails to make timely payments on his payday loan. Defaults, which are listed in credit bureaus' reports, may negatively impact a consumer's creditworthiness.
Deferred deposit lending: In this type of transaction, a payday lender issues money to a borrower, receives a postdated check from the latter, and holds it for deposit. The borrower usually has two weeks to repay the loan.
Direct deposit: The term used to describe the process of wiring or electronically depositing funds into a borrower's account.
Fee: A charge that payday lenders add on the funds borrowed.
Finance charge: This numerical figure provides the total cost of credit, including processing fees, service charges, and interest fees.
Interest: A fixed fee that a borrower pays in order to borrow money. It is usually expressed as a percentage of the sum borrowed.
Maturity date: This is the payment due date for the principal and finance charges on a payday loan or other form of credit.
No credit check personal loan: This type of credit is ideal for people with very low FICO scores, people who don’t financial history, or a low income since it gives them access to funds and does not appear on their credit report.
No fax payday loan: Also known as a faxless payday loan, this short-term payday loan helps people who need immediate cash.
No teletrack payday loan: This type of short-term loan ranging from $100 to $1000 does not rely on teletrack, a system that collects adverse credit information about consumers, such as outstanding debts and bankruptcy filings. No teletrack payday lenders do not verify a prospective borrower's credit history.
Online payday loan: This type of payday loan, with no credit required and is available on the Internet at all times, makes it possible for people to easily, quickly and safely request from the comfort of their homes. Customers must simply meet the following requirements:
- be currently employed
- have an active savings or checking account
- earn a minimum income of $1000
- be 18 years of age
- have direct deposit
Over-the-limit fees: For each month that their balance exceeds their loan limit, borrowers are charged this type of fee.
Payday loan quote: This free and secure online feature helps prospective payday loan borrowers to compare payday loan rates from a multitude of lenders.
Payday loans: Also referred to as deferred deposit, fast cash, payday advances, and cash advance, these consumer loans are unsecured, short-term (typically two weeks or less), and for a sum ranging generally from $100 to $1000. Payday loans which may be obtained online, via fax or phone, or at a brick and mortar store, are usually issued without a credit check, with the customer's job serving as collateral. The payday lender directly deposits the funds into the borrower's account until the due date, at which time the loan amount and finance charge are debited.
Payday loan calculator: This online tool enables consumers to calculate the total interest, annual percentage rate (APR), and total repayment amount that the payday loan will cost them. Prospective borrowers must simply enter the finance rate, length of the loan (i.e. 7 days, 14 days), and the loan amount.
Predatory lending: This practice involves the failure to disclose loan terms and cost or the manipulative persuasion of prospective borrowers to consent to abusive and inequitable loan terms, such as very high fees.
Prepaid debit card: This form of credit allows people to control their spending by offering them a line of credit that corresponds to the funds they deposit or load unto their account. Prepaid debit cards are particularly appealing to individuals who may otherwise not qualify for traditional credit cards and help them repair their credit. There’s no interest charge to the consumer.
Prepayment penalty: This represents the fee that lenders charge borrowers who pay a portion or all of their loan before the maturity date.
Principal: The initial loan amount borrowed, excluding interest, costs, and fees.
Rollover: Also known as extensions, rollovers allow borrowers to renew their cash advance and extend the deadline for repayment to the next payday by paying an additional fee. While some states permit unlimited extensions, many states have passed legislation limiting the number of rollovers that lenders may grant.
Truth in Lending Act (TILA): This federal legislation aims at furthering transparency in consumer credit transactions by requiring clear and conspicuous disclosures to borrowers about the cost and terms of loans. Some of the important disclosures that TILA requires lenders to make are those relating to
- finance fees
- annual percentage rate
- late payment or pre-payment penalties
- payment schedule
- their identity
- sum of all the payments
- amount financed
Unsecured loans: These types of personal loans, which are typically issued for amounts starting from $100 and do not require borrowers to pledge their home or property as collateral, involve less paperwork and are approved faster than traditional credit. Unsecured loans offer emergency cash to consumers, who may utilize the funds for any purpose (i.e. debt consolidation, medical bills, utility bills, home improvement, budget-balancing, auto purchase, vacation). Borrowers must simply furnish some employment details, such as pay stubs.