Loan Glossary

Twenty-two terms that appear in loan agreements and on this site, in plain English. If a lender uses a word you do not recognise, ask before you sign; anything worth agreeing to survives being explained.

Written by the Loan For Any Purpose USA lending team. Reviewed by the Loan For Any Purpose Editorial Review Team. Last reviewed September 10, 2026. We explain products we do not sell as well as the ones we do.

ACH

The Automated Clearing House network, used to move money between US bank accounts. Loans are funded and repaid by ACH, which is why the timing depends partly on your bank.

Adverse action notice

The written explanation a lender must give when an application is declined, stating the specific reason. You are entitled to one, and it tells you what to fix before reapplying.

Amortisation

The process by which each fixed payment covers accrued interest first and reduces principal with the remainder. Early payments are weighted toward interest, later ones toward principal.

Annual Percentage Rate (APR)

The cost of credit expressed as a yearly rate, including interest and required fees. It exists so loans of different lengths can be compared on the same basis.

Collateral

An asset pledged as security. Only our title loans use collateral, in the form of a lien-free vehicle title. Default on a secured loan can cost you the asset.

Cooling-off period

A waiting period some states require between one short-term loan being repaid and another being taken out.

Credit utilisation

The share of your available revolving credit that you are using. It is a large factor in credit scoring, which is why paying cards down with a loan often raises a score.

Debt-to-income ratio (DTI)

Your total monthly debt payments divided by your monthly income. Under 36% is comfortable; above 43% usually limits what you can borrow.

Deferred presentment

The legal term several states use for a payday loan, describing a lender holding a payment instrument for later presentment.

Finance charge

The cost of credit in dollars. On a payday loan it is a flat amount per $100 borrowed rather than a rate.

Hard inquiry

A credit check recorded when you formally apply for credit. It can lower a score by a few points and stops affecting FICO scores after twelve months.

Lien

A legal claim recorded against an asset. On a title loan, the lender records a lien against your vehicle title and releases it when the loan is repaid.

Military APR (MAPR)

A broader cost measure used under the Military Lending Act, capped at 36% for covered service members. It includes fees that an ordinary APR can exclude.

Origination fee

A fee for setting up a loan, usually a percentage of the amount and deducted from what is funded rather than billed separately.

Prepayment penalty

A charge for repaying a loan early. We never charge one, but some lenders do, so it is worth checking any agreement.

Principal

The amount borrowed, excluding interest and fees. Extra payments reduce principal, which reduces every future interest charge.

Returned payment (NSF) fee

A charge applied when a scheduled payment is returned unpaid by your bank. Your bank may charge you separately as well.

Rollover

Extending a short-term loan by paying only the fee, leaving the principal outstanding. We do not roll over or renew payday loans.

Secured loan

A loan backed by collateral. Secured loans usually allow larger amounts or lower rates in exchange for the lender having a claim on an asset.

Soft inquiry

A credit check that does not affect your score, used when you check your rate or a lender pre-screens you. Visible only to you.

Truth in Lending Act (TILA)

The federal law requiring lenders to disclose the APR, finance charge, amount financed and total of payments before you sign.

Unsecured loan

A loan with no collateral, approved on income and credit. Eight of our nine products are unsecured.

Where these come up

See rates and terms for what each fee costs here, how loans affect your credit score for inquiries and utilisation, and what are installment loans for amortisation explained with a worked example.