Payday Loans Glossary

Accrued Interest

Interest that accumulates on a loan.

Annual Percentage Rate (APR)

A payday loan APR is a percentage calculation that reflects the total cost of a loan (interest plus all fees) on an annual basis.

Asset

An item of value owned by the borrower.

Bad Credit

Relates to a low FICO score or a poor credit rating resulting from a borrower’s negative payment history: defaults, late payments, outstanding debts, bankruptcy filings, etc.

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.

Credit Worthiness

The ability of a borrower to pay back money owed.

Credit Score

Credit scoring is the primary way of evaluating a consumer’s creditworthiness. Financing decisions are often based on a credit score.

FICO Score

The FICO score, developed by the Fair Isaac Corporation, is the most popular scoring model. This model is used by lenders and creditors to assess a consumer’s credit risk.

Interest

A percentage charged on the principal loaned and in addition to any other fees for borrowing money.

Interest Rate

The percentage amount paid by the borrower for a loan.

Lender

An organization or individual that lends money to a consumer and usually charges interest and/or fees for the loan.

Loan

Money borrowed from an organization or individual that is usually repaid with interest and/or fees.

No Fax Payday Loan

Also known as a faxless payday. A short-term cash advance which carries borrowers over to their next payday. Borrowers may receive a no fax payday loan by telephone or online, without the need to fax their own bank account and employment information.

Payday Loan

Also known as a paycheck advance/payday advance/cash advance. A small, short-term loan intended to cover a borrower’s expenses until his or her next payday. The pay day loan is given to the borrower against their next payday.

Payment

A set amount including principal, interest and fees that is paid to a lender according to a specific time schedule.

Principal

The initial loan amount borrowed, excluding interest, costs, and fees.