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A Guide to Understanding Financial Terms

Provided in Partnership with GreenPath Financial Wellness.

When reading about credit cards, mortgages, or other financial products, you may encounter financial terminology and acronyms that you aren’t familiar with. Please Note that these descriptions are a guide only and are not legal definitions.

A

Adjustable-Rate Mortgage
An adjustable-rate mortgage (ARM) is a mortgage that offers the borrower a fixed interest rate for a set amount of time. After that time expires, the interest rate on the remaining balance varies throughout the life of the loan. Depending on the terms of the mortgage, the interest rate resets each month or year. This type of mortgage is also called a variable rate mortgage.

Annual Percentage Rate
The Annual Percentage Rate (APR) is the yearly cost of borrowing money. APR includes the interest and fees charged over a one-year period. Many types of debt include an APR such as credit cards, auto loans, mortgages and personal loans. The APR helps borrowers choose credit card offers, mortgages, loans, etc.

B

Balance
When referring to debt, a balance is the amount of money remaining to be repaid on a loan, credit card or mortgage. When the term “balance” refers to a checking or savings bank account, the balance is the amount of money present in the account.

Balance Transfer
A balance transfer refers to moving a balance from one account to another account, which is often an account at another financial institution. It most commonly describes transferring outstanding debt owed on a credit card to an account held at another credit card company.

Balloon Payment
A balloon payment is the money owed on a loan when the loan term expires (usually after 5-7 years). When the term is over, the borrower must pay a balloon payment for the total amount remaining on the loan, or the borrower can choose to refinance the loan for new terms and rates. Balloon loans sometimes allow the borrower to transfer the remaining amount automatically into a long-term mortgage.

Bankruptcy
When an individual or a company has debt that cannot be repaid, declaring bankruptcy gives the individual or company legal protection from the debts. Bankruptcy is a legal process that can offer relief from some or all debts, depending on the type of bankruptcy.

Budget
A budget is a written plan that tracks monthly expenses and income. It is used to help manage finances, keep current with expenses and save money.

C

Card Holder
A card holder is the person who is issued a credit card, along with any authorized users. The primary card holder is responsible for credit card payments. Credit card holders are protected by federal lending laws that protect consumer rights.

Cash Advance
A cash advance is a loan issued from a creditor. The most common cash advances are issued by a credit card or through a loan taken in advance of a paycheck. These types of cash advance loans charge special interest rates and fees on the amount of the advance. A credit card cash advance is typically the costliest credit card transaction compared to purchases or balance transfers.

Cash Advance Fee
A cash advance fee is a charge made by the bank or financial institution that the borrower owes after taking a cash advance loan. This fee could be either a one-time, flat fee that is owed at the time of the transaction or a fee charged as an annual percentage of the amount of the cash advance.

Collateral
Collateral is an asset that a lender accepts as security for a loan. If a borrower defaults on their loan payments, the lender has the right to seize the collateral and sell it to recoup any losses.

Collections
Collections occur when a creditor, or a business, like a utility company, sells past-due debt to an agency to recover the amount owed. The delinquent debt could be past due credit card debts, utility charges, medical bills, cell phone bills or other payments that are over 6 months past due. Collection agencies attempt to recover past due debts by contacting the borrower via phone and mail. See The Fair Debt Collection Practices Act for laws that protect consumer rights during the collections process.

Conventional Mortgage or Loan
A conventional mortgage or conventional loan is available through a private lender or two government-sponsored enterprises—Fannie Mae and Freddie Mac. Conventional loans are considered risky because they’re not guaranteed by the government. These mortgages can have strict requirements and higher interest rates and fees.

Credit
Credit refers to money that is borrowed that the borrower will need to repay.

Credit Card Charge-Offs
A credit card charge-off occurs when a borrower does not pay the full minimum payment on a debt for several months. At that time, the creditor writes it off as a bad debt. Note that a credit card charge-off doesn’t absolve a borrower of responsibility for the debt. Interest is still owed on the balance. Even after a credit card charge-off, the lender could turn over the account to a collections agency.

Credit History
A person’s credit history develops as they borrow, repay and manage their loan payments, expenses and other transactions. Future loans depend on a solid credit history, because lenders check this information.

Credit Report
A credit report is a statement that has information about a person’s credit history, including loan paying history and the status of credit accounts. Lenders use credit reports to help them decide if they will loan money and what interest rates they will charge.

Credit Score
A credit score is a number based on a formula using the information in a person’s credit report. The result is an accurate forecast of how likely that person is to pay bills or repay loans. Lenders use credit scores to determine what interest rate they will offer on credit cards, mortgages, car loans and other loans.

Creditor
A creditor is a person or institution that extends credit by lending a borrower money. The borrower agrees to repay the funds under agreed upon terms.

D

Debt
Debt is money owed to a lender, such as debt from credit cards, student loans, or a mortgage.

Debt Consolidation
Debt consolidation means that a person’s debts, whether credit card bills or loan payments, are rolled into a new loan with one monthly payment. A debt consolidation loan does not erase debt. Borrowers might pay more by consolidating debt into another type of loan.

Debt Management Plan
A debt management plan is when an organization works with creditors to reduce a borrower’s monthly payment and interest rates. People working through a debt management plan typically take 3-to-5 years to pay off debt. For those who team with a national nonprofit like GreenPath, a Debt Management Plan is delivered by financial counselors certified by the National Foundation for Credit Counseling (NFCC) who receive training in compassion and empathy.

Debt Counseling
Borrowers receive debt counseling (also called credit counseling) when a trained credit counselor reviews their personal finances, debt and credit history to make personalized recommendations to help manage financial challenges. In the case of GreenPath, debt counseling is provided by certified financial counselors who take into consideration a person’s total financial picture, from outstanding credit card payments to overall financial health.

Debt Settlement
Debt settlement is a process of negotiating with creditors to accept a percentage of the full amount on debt that is charged off or severely delinquent. For-profit debt settlement companies operate to deliver profits to their organization. As part of the for-profit business model, debt settlement employees are often paid on a commission basis, based on the fees they collect from consumers.

Default
A default on a loan occurs when a loan payment is not made by the borrower according to the payment terms of an agreement.

Deferment
A loan deferment is when a lender agrees that a borrower can pause making monthly loan payments for a set amount of time. Loans that are deferred are not forgiven. The borrower still owes the money and must repay the debt. Deferments are often available with student loans to provide the borrower with a set amount of time before making any payments.

Delinquent
When a borrower is late or overdue on making a payment, such as on payments to credit cards, a mortgage, an automobile loan or other debt, it is called delinquent. People who are delinquent, or late, with making payments may be charged a late fee.

F

Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act is a set of laws that protect consumer rights during the debt collection process.

Fannie Mae
Fannie Mae, the informal name of the Federal National Mortgage Association, is a U.S. government-sponsored enterprise that buys mortgages from lenders, bundles them into investments and sells them on the secondary mortgage market. Typically, Fannie Mae purchases home mortgage loans from commercial banks or big banks.

Finance Charge
A finance charge is the cost of borrowing money. The cost to a borrower includes interest and other fees. Lenders typically set finance charges as a percentage of the amount borrowed. Some lenders might set a flat fee finance charge.

Fixed Rate
A fixed rate is an interest rate that stays the same for the life of a loan, or for a portion of the loan term, depending on the loan agreement.

Forbearance
Forbearance is a process when a lender agrees to a lower payment or no payment for a temporary period of time. Forbearance is not loan forgiveness. After that time expires, the borrower may face higher payments, accrued interest or an extended loan term.

Foreclosure
Foreclosure is a legal proceeding that happens when a borrower does not make payments on a secured debt. The lender may start legal foreclosure proceedings to seize the property associated with the debt. As an example, default on a mortgage could result in foreclosure and auction of the property.

Freddie Mac
Freddie Mac, the informal name of the Federal Home Loan Mortgage Corporation, is a U.S. government-sponsored enterprise that buys mortgages, combines them with other forms of loans, and sells the debt on the secondary mortgage market. Typically, Freddie Mac purchases home mortgage loans from smaller banks and lenders.

G

Grace Period
A grace period is a set period of time in which borrowers do not have to pay finance charges or interest if they pay balances in full. Revolving credit card lending provides a borrower with a grace period.

I

Interest
Interest refers to the cost of borrowing funds, paid by to the lender by the borrower. Interest also means the profit that accrues to those who deposit funds in a savings account or investment.

Interest Rate
An interest rate is the fee lenders charge a borrower, calculated as a percentage of the loan amount. The percentage charged when borrowing money is known as the interest rate.

L

Loan Forgiveness
Loan forgiveness means a borrower is no longer obligated to make loan payments. With student debt loan forgiveness, the borrower must meet certain criteria such as actively serving in the military, performing volunteer work, teach or practice medicine in certain types of communities, or must meet other criteria specified by the forgiveness program.

Loss Mitigation
Loss mitigation is the process when mortgage servicers work with borrowers to avoid foreclosure.

Loan Modification
Loan modification is when a lender makes a permanent change to loan terms. The modifications could include changing the interest rate, type of mortgage or extending the time to pay the mortgage balance.

M

Minimum Payment
The minimum payment is a payment made on a loan or credit card that is specified by the lender as the smallest payment amount due. Borrowers can pay more than the minimum payment.

Mortgage
A mortgage is the loan a borrower takes on from a lender to purchase real estate.

P

Past Due
Past due is when a payment has not been made by its due date. Borrowers who are past due will usually face penalties and are subject to late fees.

Private Mortgage Insurance
Private mortgage insurance is a type of mortgage insurance that might be required for borrowers to pay for with a conventional loan. Private mortgage insurance protects the lender in the event a borrower stops making payments on the loan.

R

Reinstatement
Reinstatement refers to a lump sum payment that makes an account current when the borrower pays everything that is owed. This payment would include any missed payments and fees.

Repayment Plan
A repayment plan is a written agreement for borrowers who are past due on loan payments. This option allows the borrower to pay the late amount as a smaller addition to the regular monthly payment, spread out over several months.

Revolving Credit
Revolving credit is when a creditor increases the credit limit to an agreed level as a borrower pays off a debt, such as a credit card. Revolving credit may take the form of credit cards or lines of credit with other lenders.

S

Secured Debt
A secured debt is a loan that allows the lender to seize the asset or collateral used to acquire the debt to repay the funds advanced to the borrower in the event of default. Examples of secured debt are mortgages and auto loans. In these cases, the item being financed is the asset or collateral for the financing.

Short Sale
A short sale is when a homeowner in financial distress sells property for less than the amount due on the mortgage.

U

Unsecured Debt/Unsecured Loan
Unsecured debt or an unsecured loan is a loan that is not backed by an asset or collateral. It is riskier than secured debt. The interest rate for unsecured debt is normally higher than for secured debt.

V

Variable Rate Mortgages
A variable rate mortgage is a mortgage in which the initial interest rate is fixed for a period of time. After that period expires, the interest rate on the outstanding balance varies throughout the life of the loan. Depending on the terms of the mortgage, the interest rate resets each month or year. This type of mortgage is also referred to as an adjustable-rate mortgage (ARM).


Additional resources for Financial Wellness:

Through our partnership with GreenPath, you have direct access to many resources for improving your financial wellness, including free financial counseling. GreenPath can help you take control of your financial future, connect with GreenPath at (877) 337-3399.

Can’t call right now? Request a call from our partners at GreenPath today.

Choosing the Right Health Insurance Plan

From our friends at GreenPath

Choosing the right health insurance plan is critical if you want to save money on your health care expenses. This is the first step for creating a healthcare budget that anticipates any cost you may have to cover down the road. Here are a few tips you can follow to help you choose the right health insurance plan for you and your family:

  1. Research the costs of the medical services you think you will use in the following year. Knowing the costs for the medical services you need will help you choose a plan that will cover most of those costs. It will also help you determine how much you need to save to cover the costs that will not be covered by your health insurance provider. Those funds can be deposited into a Health Savings Account or Flexible Spending Account.
  2. Use your provider’s website to research individual and family plans. You can also visit healthcare.gov to research health insurance plans. Healthcare.gov provides a marketplace for you to compare different health insurance plans based on your specific needs.
  3. Ask these three questions to understand and compare health care plans:
  • What is the deductible for this plan? Your deductible is the amount of money you are required to spend before your health insurance will cover your health care expenses. Keep in mind that higher deductible plans typically have lower monthly premiums.
  • What are the co-payments or co-insurance amounts associated with this plan? Co-payments or co-insurance are what you pay for medical services after reaching your deductible.
  • What is the out-of-pocket maximum for this plan? The out-of-pocket maximum is the amount of money you have to spend on medical services before your health insurance provider pays for your covered services.

 

What to Do After Choosing the Right Health Insurance Plan

After choosing the most suitable health insurance plan for you and your family, it would be wise to look into opening a Health Savings Account (HSA) or Flexible Spending Account (FSA). These types of accounts enable you to set aside pre-tax funds to save money for expected and unexpected health care expenses.  This means you can save these funds without paying tax on the money (which could result in a larger tax return for you).

You can use the amount of your deductible, co-payments or co-insurance, and/or out-of-pocket maximum to determine how much you should deposit into a health savings account or flexible spending account. Following these tips will help you feel confident in choosing the plan that’s most suitable for you and your family.


Health insurance can be an important way to keep your family—and your finances—healthy. USAgencies Credit Union offers our members access to affordable health insurance coverage via the TruStage Health Insurance Program and GoHealth. Learn more.

Holiday Shopping Checklist

From our friends at GreenPath.

The holidays are officially here!  And it won’t be long before families are exchanging presents.  Holidays and gifts can take a big bite out of your budget so a little planning can help keep everything under control.

It is important not to get caught up in the last-minute emotion of the season and spend more than you planned. Holiday overspending ruins many festive occasions and can result in long repayment schedules.

The following are suggestions to help relieve holiday budget stress:

  • Shop early for gifts. This allows you to take advantage of sales, specials and bargains. Don’t over buy or forget you have already shopped for someone.
  • Make your own gifts. Use skills you have to sew, bake, paint or make crafts.
  • Don’t be a “One gift for you…one gift for me” shopper! And don’t be tempted to give your gifts early lest you buy more!
  • Use layaway plans if possible. Most allow you to pay at a rate you can afford either weekly or monthly.
  • If you have a large family, consider drawing names to exchange gifts.
  • Shop your local craft fairs and shows for specialty items – you’ll find some great ideas. Sometimes you can bargain with the vendor.
  • Family members would appreciate an IOU to mow the loan or wash the car in the spring.
  • If you plan to fill stockings or bags for the children, try putting a few pieces of fruit (apples & oranges) in the bottom first. Also, coloring books and scratch pads make great inexpensive fillers.
  • Know your merchants’ return policies before buying.
  • Rack up Rewards points by purchasing all of your holiday gifts using your USAgencies’ Visa Platinum Rewards card. Earn 1 reward point for every $1 spent, plus, 5% of net income from the Visa Platinum is donated to local community giving initiatives! Points can be redeemed for merchandise, travel, and even a lower auto loan rate or higher CD rate. Talk about smart spending!

Don’t forget to plan ahead for expenses such as holiday decorations, baking supplies (especially if baking for gifts), increased utility bills, food and wrapping paper. These expenses are rarely considered and can really add up fast.

 


Need help staying on track with your holiday budget?  As a member of USAgencies Credit Union, you can take advantage of GreenPath Financial Wellness, a free financial education and counseling program.  GreenPath counselors are available Monday through Thursday 8 a.m. to 10 p.m. (EST), Friday 8 a.m. to 7 p.m. and Saturday from 9 a.m. to 6 p.m. To use this new service, simply call 1-877-337-3399 or visit them on the web at greenpath.usacu.org.

 

 

Introducing… GreenPath

USAgencies is pleased to announce our newest member benefit – GreenPath Financial Wellness.

As a valued member of USAgencies, we are committed to serving you.  And as a benefit to you, we are providing you with free access to money management and financial education services.

USAgencies has teamed up with GreenPath to bring you GreenPath Financial Wellness, a financial education and counseling program.  Through comprehensive education and exceptional service, GreenPath has been assisting individuals for more than 50 years.

As a member of USAgencies, you can receive assistance from GreenPath with:

  • Personal and family budgeting
  • Understanding your personal credit report and how to improve your score
  • Personal money management
  • Debt repayment (fees may apply)
  • Avoiding bankruptcy, foreclosure, and repossession

GreenPath can give personalized answers to your individual needs.  For issues ranging from developing a proactive savings plan to preventing home foreclosure, advice is only a phone call or click away.

To learn more about this new service, simply call 1-877-337-3399 or visit USACU.org/education.