Borrower

A person who is legally responsible to repay a loan

 

Collateral

Something of value (i.e. a home, stocks, and bonds) used to ensure that a loan will be repaid.  If the loan is not repaid according to the terms of the loan contract, the collateral is forfeited to the lender (see foreclosure).

 

 

Contract

A binding, mutual agreement between two or more legally competent parties

 

Debt

An amount owed

 

 

Default

Failure to pay back a loan on time and in full

 

 

Equity

The difference between the amount of money owed on a home and the actual value of the home 

 

 

Foreclosure

When a loan is in default, the lender forces the sale of the home to repay the debt.

 

Fraud

Intentionally tricking another into believing something false

 

Interest Rate

A cost for the loan, expressed as a percentage (5%, 10%, 15%), that is paid back in addition to the loan.  Credit cards can charge up to 29% interest.

 

 

Lenders

People or organizations in the business of loaning money

 

 

Loan Terms

Specific elements of a loan contract including payments and consequences for nonpayment

 

 

Mortgage Loan

A loan secured by real estate that must be repaid over a set period of time

 

 

Refinancing

Using a home’s equity to replace an old loan with a new loan

 

 

Subprime Lending

Loans with terms made to people who would not ordinarily qualify for the best loan terms because of poor, or no credit.  These loans come with higher interest rates, shorter terms, and are much more likely to default.