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When obtaining a loan or a credit card, there are some important terms you’ll need to understand in order to compare loans to each other. Here are some of the most important ones:
The calculation as required by the Truth in Lending Act to express as a percentage the total of the financing charge paid by the borrower to the loan amount.
Some lenders use the average daily balance to calculate interest. This calculation takes the sum of the daily balance for each day in the month and divides by the total amount of days.
The property or personal effects pledged as security for a loan.
Collateralized/secure debt is secured by property or personal effects (such as a mortgage, which is secured by the home), while uncollateralized debt has no collateral securing it (such as a student loan).
When interest is charged on interest, rapidly increasing the amount owed.
Failure to abide by the requirements of the note and the security instrument, most commonly a failure to make payments when they are due.
Failure to make payments when they are due.
The penalty incurred for failing to make payments when due.
The amount that must be paid to keep the loan current. For credit cards, this amount doesn’t always cover the interest due.
The actual amount of loan as established by a note.
A subsidized loan is a loan where the account holder doesn’t need to pay interest for a specified period of time. The U.S. Government subsidizes some student loans.
Unsubsidized student loans accrue interest while the borrower is still in school.
The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.
Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.
The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.
The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.
The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.