Debt Glossary starting with letters from F to W

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.