Debt Glossary starting with letters from F to W
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| Questions | Answers |
|---|---|
| Free Application for Federal Student Aid (FAFSA) | A form to determine the type of federal student aid for which students are eligible. |
| Fair Credit Reporting Act (FCRA) | Federal law that promotes accuracy, fairness and privacy, and enables customers to view their own credit reports and dispute errors. |
| Fair Debt Collection Practices Act (FDCPA) | Federal consumer protection law that prevents abusive debt collection practices. |
| Fair Market Value (FMV) | Price an asset would garner if sold in the open market. |
| Federal Family Education Program (FFEL) | Defunct higher education loans program funded through private partnerships administered at the state and local level. |
| Federal Trade Commission (FTC) | Agency that protects consumer rights and enforces consumer protection laws. |
| FICO score | A type of credit score created by the Fair Isaac Corporation that ranges between 300 and 850. |
| Fixed-rate interest | Percentage will not change for the life of the loan. |
| Forbearance | A temporary postponement granted by the lender when borrower cannot make payments because of financial hardship. Interest accrues and is added to the overall amount owed. |
| Foreclosure | Lender legally takes possession of a mortgaged property when borrower is unable to make payments or meet obligations. |
| Fraud | Attempting to use deception for financial gain. |
| Garnishment | Act of employer withholding part of an employee’s wage to pay it to a creditor. |
| Grace period | Period of time between graduation or leaving full-time college enrollment and making the first payment on a student loan. |
| Health Savings Account (HSA) | Medical savings account with tax benefits for people who participate in a high-deductible health plan. |
| Home Affordable Modification Program (HAMP) | A federal program created in 2009 that assists eligible homeowners to modify the loans on their home mortgage. |
| Home equity | The difference between the market value of a home and the outstanding mortgage balance. |
| Home Equity Line of Credit (HELOC) | A type of secondary financing that consists of a revolving line of credit. |
| Home equity loan | Secondary financing secured by equity in the borrower’s home. |
| Interest rate | The cost of borrowing money, usually expressed as a percentage. |
| Internal Revenue Services (IRS) | Federal government agency responsible for tax regulation. |
| Individual Retirement Account (IRA) | Allows taxpayers to direct pre-tax income into a retirement account. Distributions are treated as normal income and are subject to income taxes. |
| Lease | A legal contract signifying rental of goods or property. |
| Lender | Entity that makes funds available for borrowing. |
| Liability | Obligation for repaying a loan in addition to charges and interest. |
| Lien | A lender or creditor’s right to secure a debt against the property of a borrower. If obligations are not met, property may be sold. |
| Liquidation | Converting assets into cash, typically to settle debts with creditors. |
| Loan forgiveness | Writing off all or part of a federal student loan balance when borrower meets certain criteria like a career in an eligible field such as teaching, law enforcement and others. |
| Loan term | Agreed time period for loan repayment. |
| Master Promissory Note | Signed legal document that holds terms and conditions of a loan. |
| Mortgage | A type of loan to purchase commercial or residential property. |
| Open-end credit | Pre-approved loans made on a continuous basis, rather than at one time. It is also known as revolving credit. |
| Paid in full | A status on a credit report that shows debts as paid, rather than reduced or settled. |
| Personal loan | A type of unsecured loan, meaning not tied to any property, for personal use and typically based on creditworthiness and other factors. |
| Pension | A fixed sum paid at regular intervals, typically following retirement. |
| Power of Attorney | Legal document that allows one person to make decisions, including financial ones, on behalf of another individual. |
| Prime rate | A low interest rate offered to the most creditworthy borrowers. |
| Principal | The amount borrowed, not including capitalized fees and interest. |
| Private sector | A for-profit businesses owned by private individuals or groups, rather than the government. |
| Refinancing | Replacing an old loan with a new loan at a different interest rate by the same individual. |
| Repossession | Act of a creditor seizing property to make up for a borrower’s failure to pay on a loan. |
| Retirement | Stage of life after ceasing to work full-time. |
| Secured debt | Loan backed by collateral such as a car or property. |
| Short sale | Selling property or security when the recovered money is less than the amount owed. |
| Simple interest | Interest rate charged on the principal of a loan. |
| Social Security Administration | The tax-funded federal program which offers retirement benefits and other programs. |
| Subsidized loan | A type of need-based loan for which the government pays the interest while the borrower is in school and during the grace deferment periods. |
| Tax lien | If taxes are unpaid for a period of time, a lender may claim the borrower’s property equal to the delinquent taxes. |
| Term | Period of time between the initial procurement of the loan and the time the loan is to be paid back in full. |
| Transaction | An exchange of goods and services. |
| TransUnion | One of the three major credit bureaus. |
| Unsubsidized loan | A type of loan for which the government doesn’t pay the interest. Borrower is responsible for interest at the moment funds are disbursed. |
| Variable rate | Interest rates that are periodically reset. |
| Veteran | In financial aid terms, it’s a former member of the U.S. armed forces who served on active duty and was not dishonorably discharged. |
| W-2 form | Employers issue this IRS form that lists an employee’s wages and tax withheld. |