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Key Terms

Harpsey has provided below the key terms associated with borrowing. Whether you’re looking to get a payday loan, consolidate your debt, or seeking a quick loan approval process, our glossary provides clarity on crucial terms you will encounter. 


Here’s an A-Z breakdown of key terms:



Annual Percentage Rate (APR): Provides a comprehensive view of the total cost of borrowing, expressed as an annual interest rate. It includes both the interest rate and any additional fees.

Arrears: The state of being behind in the payment of debts. If you are in arrears, you have not paid the required payments on a loan or other obligation.

Asset: Something valuable that an individual or corporation owns or controls. In the context of loans, assets can be used as collateral to secure a loan.




Bad Credit: A low credit score, often indicating a history of missed payments or defaults on loans. Having bad credit can impact a borrower’s ability to qualify for loans or credit cards.

Broker: A person or entity that connects borrowers with lenders. Brokers facilitate the loan application process, often working with a network of lenders to find the best match for the borrower’s needs.

Bankruptcy: A legal process for individuals or businesses unable to repay their debts. It provides a fresh start by eliminating or restructuring debts under the protection of the court.




Cash Advance: A short-term loan provided by a credit card or an employer. It often comes with high-interest rates and additional fees.

Co-Signer: A person who signs a loan with the primary borrower and is responsible for the debt if the borrower defaults. Co-signers are often used to provide additional assurance to lenders, especially if the primary borrower has a limited credit history or poor credit.

Cooling Period: A period during which a borrower can cancel a loan agreement without incurring penalties. It provides a window for borrowers to reconsider their decision.

Credit: The ability to obtain goods or services before payment, with the understanding to pay for them later. Credit can come in various forms, including credit cards, loans, and lines of credit.

Credit Check: The process of reviewing a person’s credit report and history. Lenders use credit checks to assess the creditworthiness of borrowers.

Credit History: A record of a person’s borrowing and repayment activities. It includes information about credit accounts, payment history, and other financial behaviors.

Credit Score: A numerical representation of a borrower’s creditworthiness, usually ranging from 300 to 850. A higher credit score indicates lower credit risk, influencing loan approval and interest rates.

Credit Union: A member-owned financial cooperative that provides financial services. Credit unions are nonprofit organizations that exist to serve their members rather than to maximize profits.




Defaults: Failure to repay a loan according to the agreed-upon terms. Defaults can lead to additional fees, damaged credit, and legal consequences.

Debt Consolidation: Combining multiple debts into a single, larger debt. This can simplify repayment and, in some cases, reduce the overall interest paid.

Direct Lender: A financial institution that lends money directly to the borrower. Direct lenders fund loans without intermediaries such as brokers.




Eligibility Criteria: The requirements a borrower must meet to qualify for a loan. Eligibility criteria may include factors such as age, income, employment status, and credit history.

Emergency Fund: Savings set aside to cover unexpected expenses or emergencies. An emergency fund provides a financial cushion, reducing the need to rely on loans in times of unexpected expenses.




Fixed-Rate Loan: A loan with a set interest rate that doesn’t change throughout the loan term. Fixed-rate loans provide predictability, as monthly payments remain constant.




Guarantor: A person who agrees to repay a loan if the primary borrower fails to do so. Guarantors provide an additional layer of security for lenders, especially in cases where the primary borrower has a limited credit history.




Hard Credit Check: A thorough credit inquiry that may impact the borrower’s credit score. Hard credit checks are typically performed during the loan application process and are more comprehensive than soft credit checks.




Installment Loan: A loan repaid with a set number of scheduled payments. Installment loans provide borrowers with a structured repayment plan, making it easier to budget.

Interest Rates: The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage. Interest rates determine the cost of borrowing.




Joint Loan: A loan taken out by two or more individuals, sharing equal responsibility for repayment. Joint loans often involve co-borrowers who combine their financial resources to qualify for a larger loan amount.




Lender: An individual, public or private group, or financial institution that makes funds available to borrowers. Lenders can be banks, credit unions, or online lending platforms. Lenders typically offer funds to borrowers in exchange for repayment with interest.




Monthly Repayment: The amount paid by a borrower to a lender on a monthly basis. Monthly repayments include both principal and interest and contribute to the gradual repayment of the loan.




No Credit Check Loan: A loan where the lender doesn’t perform a hard credit inquiry. No credit check loans are designed to provide options for individuals with limited or poor credit history.




Online Payday Loan Lender: A lender who provides payday loans through online platforms. Online payday loan lenders offer quick and convenient access to short-term loans.

Origination Fee: A fee charged by the lender for processing a new loan. Origination fees are typically deducted from the loan amount and contribute to the cost of obtaining the loan.

Overall Debt to Income Ratio: A financial metric that compares a person’s debt payment to their overall income. Lenders use this ratio to assess a borrower’s ability to manage additional debt.




Payday Loan: A short-term, high-interest loan typically due on the borrower’s next payday. Payday loans are often used for emergency expenses but come with higher costs compared to traditional loans.




Quick Approval: The swift process of approving a loan application. Quick approval is desirable for borrowers seeking timely access to funds.




Refinancing: Paying off an existing loan with a new loan, often with better terms. Refinancing allows borrowers to secure more favorable interest rates or change other terms of the loan.

Representative APR: The advertised interest rate that a majority of successful applicants will receive. It provides a general idea of the interest rate borrowers can expect.

Repayment Plan: A structured schedule for repaying a loan. Repayment plans outline when and how much borrowers need to pay to fulfill their loan obligations.

Rollovers: Extending the repayment period of a loan by paying only the interest and fees. Rollovers can lead to additional costs and may result in a cycle of debt for borrowers.




Secured Loans: Loans that are backed by collateral. Collateral can include assets like a car or home, which the lender can seize if the borrower fails to repay.

Self-employed: An individual who works for themselves rather than as an employee of another. Self-employed individuals may have different income documentation requirements when applying for loans.

Soft Credit Check: A less detailed credit inquiry that doesn’t impact the borrower’s credit score. Soft credit checks are often used for pre-qualifications and do not leave a mark on the credit report.




Term: The duration of the loan. Loan terms vary and can range from a few months to several years, depending on the type of loan.




Unemployed: An individual who is currently without a job. Unemployed individuals may face challenges when applying for loans, as lenders typically prefer borrowers with stable income.

Unsecured Loan: A loan that is not backed by collateral. Unsecured loans rely on the borrower’s creditworthiness and income to determine eligibility.




Variable-Rate Loan: A loan with an interest rate that can change over time. The interest rate is often tied to a benchmark, leading to fluctuations in the borrower’s payments over the loan term.