--- title: "Lending Glossary | Desert Rock Capital" url: "https://www.desertrockcapital.com/glossary" description: "Plain-language lending glossary from Desert Rock Capital: clear definitions of signature loans, APR, collateral, amortization, credit checks, and more." --- Lending Glossary # Borrowing terms, in plain language. Plain-language definitions of the words you meet when you borrow money: signature loans, installment loans, APR, origination and other fees, collateral, amortization, credit checks, and more. Each term is defined neutrally, the way a dictionary would, so you can read any loan agreement and understand your options. 41 terms About this glossary Desert Rock Capital is a licensed Utah installment lender. This glossary explains common lending terms in plain language so you can understand your options. Desert Rock Capital makes personal, signature, and installment loans from $100 to $3,000, with no credit check and no collateral. Borrowing comes with its own vocabulary, and the words below appear across many lenders and loan types, not only here. Every definition on this page is written neutrally, the way a dictionary or financial-reference site would write it: what the term means and how it works, with no rates and no sales pitch. The goal is simple, to help you read a loan agreement, compare your choices, and decide what fits your situation. - Loan types, from signature and installment loans to lines of credit - Loan costs and fees, including APR, origination, late, and other fees - Loan structure, such as amortization, term, and collateral - Credit, approval, repayment, and the basics of how each works ## Loan types 11 Loan types ### Signature loan A signature loan is an unsecured personal loan approved on the customer's income, profile, and signature rather than any collateral. The customer's written promise to repay is the only security behind it. Read the definition Loan types ### Installment loan An installment loan is a loan repaid in a series of scheduled payments over a set term rather than all at once. Each installment covers part of the interest and part of the principal borrowed. Read the definition Loan types ### Personal loan A personal loan is money borrowed for personal use and repaid in fixed installments over a set term. It can be used for many everyday purposes, such as a repair, a bill, or consolidating other debt. Read the definition Loan types ### Unsecured loan An unsecured loan is a loan that is not backed by collateral. The lender relies on the customer's income, ability to repay, and overall profile instead of a pledged asset. Read the definition Loan types ### Secured loan A secured loan is a loan backed by collateral, an asset the lender can take if the loan is not repaid. A mortgage and an auto loan are common examples. Read the definition Loan types ### Payday loan Federal rules do not define "payday loan" by name; the corresponding federal term is a "covered short-term loan," for which, under the CFPB's Payday Lending Rule, "the consumer is required to repay substantially the entire amount of the loan within 45 days of consummation." Read the definition Loan types ### Title loan A title loan is a secured loan that uses the customer's vehicle title as collateral. The amount is tied to the vehicle's value, and the lender can repossess the vehicle if the loan is not repaid. Read the definition Loan types ### Cash advance A cash advance is short-term cash borrowed against a credit line or future income, such as a credit card cash advance or a storefront advance. It usually carries a fee, and on a credit card interest often begins accruing immediately with no grace period. Read the definition Loan types ### No-credit-check loan A no-credit-check loan is a loan a lender reviews without pulling the applicant's traditional credit report. Approval rests on other factors, most commonly income and ability to repay. Read the definition Loan types ### Line of credit A line of credit corresponds to the federal term "open-end credit," which the Truth in Lending Act (Regulation Z) defines as "consumer credit extended by a creditor under a plan in which: (i) The creditor reasonably contemplates repeated transactions; (ii) The creditor may impose a finance charge from time to time on an outstanding unpaid balance; and (iii) The amount of credit that may be extended to the consumer during the term of the plan (up to any limit set by the creditor) is generally made available to the extent that any outstanding balance is repaid." Read the definition Loan types ### Revolving credit Revolving credit is a form of borrowing that can be used repeatedly up to a set limit, paid down, and borrowed again, such as a credit card or a line of credit. There is no fixed number of payments and no set payoff date. Read the definition ## Loan costs 12 Loan costs ### Principal Principal is the amount of money actually borrowed, before any interest or fees. As payments are made, the portion applied to principal reduces the remaining balance. Read the definition Loan costs ### Interest Interest is the cost of borrowing money, charged by the lender as a percentage of the amount owed. It is the amount paid on top of repaying the principal. Read the definition Loan costs ### APR (annual percentage rate) Under the Truth in Lending Act (Regulation Z), the annual percentage rate is "a measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made." Read the definition Loan costs ### Fixed interest rate A fixed interest rate is an interest rate that stays the same for the entire life of the loan, so the rate and the payment do not change over time. As one federal example, the Truth in Lending Act defines a "fixed-rate mortgage" as "a transaction secured by real property or a dwelling that is not an adjustable-rate mortgage or a step-rate mortgage." Read the definition Loan costs ### Origination fee An origination fee is a charge some lenders apply for processing a new loan, often taken from the loan proceeds or added to the balance. It is part of the cost of borrowing and is commonly reflected in the APR. Read the definition Loan costs ### Application fee An application fee is a charge some lenders apply to process and review a loan or credit application. It is generally paid at the time of applying and may be charged whether or not the application is approved. Read the definition Loan costs ### Finance charge Under the Truth in Lending Act (Regulation Z), the finance charge is "the cost of consumer credit as a dollar amount. It includes any charge payable directly or indirectly by the consumer and imposed directly or indirectly by the creditor as an incident to or a condition of the extension of credit. It does not include any charge of a type payable in a comparable cash transaction." Read the definition Loan costs ### Prepayment penalty In the Truth in Lending Act's closed-end credit rules, a "prepayment penalty means a charge imposed for paying all or part of the transaction's principal before the date on which the principal is due," subject to limited exceptions. Read the definition Loan costs ### Late fee A late fee is a charge a lender applies when a payment is not received by its due date or after any grace period. The amount and timing are set in the loan or credit agreement. Read the definition Loan costs ### Returned-payment (NSF) fee Under the Truth in Lending Act (Regulation Z), a returned-payment fee is "any fee imposed by the creditor for a returned payment." Read the definition Loan costs ### Annual fee In the Truth in Lending Act's credit-card rules, an annual fee is "any annual or other periodic fee that may be imposed for the issuance or availability of a credit or charge card, including any fee based on account activity or inactivity." Read the definition Loan costs ### Maintenance / servicing fee A maintenance or servicing fee is a charge for the ongoing administration of a loan or account, such as managing payments and statements. It may be billed periodically or as part of the cost of the credit. Read the definition ## Loan structure 9 Loan structure ### ACH / automatic payment (auto-pay) ACH is an electronic network used to move money between bank accounts, and auto-pay is an arrangement that uses it to debit scheduled loan or bill payments automatically. You authorize the withdrawals in advance. Read the definition Loan structure ### Collateral Collateral is an asset you pledge to back a loan, which the lender can take if the loan is not repaid. A house backs a mortgage and a car backs an auto loan or a title loan. Read the definition Loan structure ### Term (loan term) A loan term is the length of time you have to repay a loan in full, from the first payment to the last. A longer term usually means smaller individual payments but more total interest paid. Read the definition Loan structure ### Amortization Amortization is the process of paying off a loan through regular payments that cover both interest and principal over time. Early payments lean more toward interest, and later payments lean more toward principal. Read the definition Loan structure ### Fully amortized loan A fully amortized loan is a loan whose scheduled payments pay off the entire balance, both principal and interest, by the end of the term. The final scheduled payment leaves nothing left to owe. Read the definition Loan structure ### Balloon payment A balloon payment is a large, single payment due at the end of some loans, after a series of smaller payments. It is often substantially larger than the regular payments. Read the definition Loan structure ### Biweekly payment A biweekly payment is a payment made every two weeks rather than once a month, dividing a loan balance into smaller, more frequent amounts. Read the definition Loan structure ### Lump sum A lump sum is a single payment of a full amount at once, rather than spread over time. In lending, it can describe how a loan is funded or repaid. Read the definition Loan structure ### Debt consolidation Debt consolidation is combining several debts into one new loan or balance with a single payment. It replaces multiple due dates and rates with one, and the overall cost depends on the terms of the new loan. Read the definition ## Credit & approval 6 Credit & approval ### Credit check A credit check is a lender's review of an applicant's credit history and credit report when they apply for credit. It helps the lender assess how the applicant has handled borrowing in the past. Read the definition Credit & approval ### Credit score A credit score is a number that summarizes a person's credit history and estimates how likely they are to repay borrowed money. It is calculated from their borrowing and payment record. Read the definition Credit & approval ### Hard vs soft credit inquiry A hard inquiry is a credit check tied to a credit application that can temporarily lower a credit score, while a soft inquiry, such as checking one's own credit, does not affect the score. The two appear differently on a credit file. Read the definition Credit & approval ### Underwriting Underwriting is the process a lender uses to evaluate a loan application and decide whether to approve it. The lender weighs the information provided against its lending criteria. Read the definition Credit & approval ### Ability to repay Ability to repay is whether you can realistically afford a loan's payments out of your income and resources. Lenders assess it as part of deciding whether to extend credit. Read the definition Credit & approval ### Cosigner A cosigner is a second person who signs a loan with you and agrees to repay it if you do not. Their income and credit can help an application qualify, and they share full responsibility for the debt. Read the definition ## Repayment & risk 3 Repayment & risk ### Default Default is failing to repay a loan according to its terms, usually after payments have been missed for an extended period. It is a more serious stage than being briefly late. Read the definition Repayment & risk ### Delinquency Delinquency is being late on a loan payment, from the day a payment is missed until the account is brought current. Prolonged delinquency can lead to default. Read the definition Repayment & risk ### Rollover A rollover is extending or renewing a short-term loan that is not repaid on time, usually by paying a new fee to push the due date out. It is most associated with payday loans. Read the definition ## Know the terms? Put them to work. Desert Rock Capital lays out every term in writing before you sign. A real decision comes back in about 30 minutes. Apply now