Financial Literacy Glossary
Every industry has its own unique language. Personal loans are no different. Use this glossary of personal finance terms to better understand payday loans, credit, and more.
4 Principles of Personal Finance
An approach to managing one’s finances, including income, saving, spending, and investment.
Janet adhered to the 4 principles of personal finance for her future to ensure her financial well-being.
Learn more about 4 Principles of Personal Finance.
4 Rules of Personal Finance
A set of four best practices that can help people avoid debt and save money. The rules include: 1) Spending less money than you make, 2) saving the rest of the money you made, 3) working to earn more money, and 4) using your money by investing to earn more money. The idea is that when you follow these four suggestions that you’ll be able to avoid debt and save money.
Mary swears by the 4 rules of personal finance, and because of that she religiously spends less money than she makes, saves the remaining money, is negotiating for a raise, and is investing her savings to earn more money.
Learn more about 4 Rules of Personal Finance.
50 30 20 Budget Rule
A personal finance rule that says to split your income into three categories of spending: 50% on needs, 30% on wants, and 20% on savings.
I always follow the 50 30 20 budget rule, allocating 50% of my income to necessities, 30% to discretionary spending, and 20% to savings and debt repayment.
Learn more about 50 30 20 Budget Rule.
5 Cs of Credit
A system lenders use to assess a borrower’s creditworthiness, standing for capacity, capital, conditions, character, and collateral.
When applying for a loan, the lender typically evaluates your creditworthiness based on the 5 Cs of credit, which include character, capacity, capital, collateral, and conditions.
Learn more about 5 Cs of Credit.
70 20 10 Budget Rule
A way to manage finances by dividing your income into three categories: 70% for living expenses, 20% for saving money, and 10% for debt.
Sarah, who has more day-to-day expenses, swears by the 70 20 10 rule since it allows her to allocate 70% of her income to living expenses, 20% to savings, and 10% towards paying off debt.
Learn more about 70 20 10 Budget Rule.
40 30 20 10 Budget Rule
A budget for saving money where you divide your income into 4 categories: 40% to needs, 30% to wants, 20% to savings or debt, and 10% to goals.
The 40 30 20 10 budget rule suggests dividing your income into categories, providing a structured approach to managing your finances.
Learn more about 40 30 20 10 Budget Rule.
60 20 20 Budget Rule
A percent-based budget where you allocated 60% of income to needs, 20% to wants, and 20% to savings.
Emily uses the 60 20 20 budget rule to enjoy life’s pleasures while maintaining her financial security, as it puts 60% of her income to needs, and divides the remainder evenly between wants and savings.
Learn more about 60 20 20 Budget Rule.
American Bankers Association (ABA) Routing Number
A 9-digit number denoting the bank or financial institution issuing a check.
The application asked me to add my ABA routing number and account number to receive a direct deposit.
Learn more about American Bankers Association (ABA) Routing Number.
An arrangement for regular business dealings between a financial institution or business and a consumer that involves the maintenance of data to facilitate a service.
I logged into my Net Pay Advance account online to update my debit card information and receive instant funding.
Learn more about Account.
Automated Clearing House (ACH) Funding
A method of transferring funds without paper checks, credit card networks, or cash, notably through direct deposits.
My employer offers direct deposit so I receive my paycheck through ACH deposit on paydays.
Learn more about Automated Clearing House (ACH) Funding.
The outlined repayment schedule of a loan, typically a loan type that has multiple payments.
The amoritization schedule of my online installment loan is dependent upon my pay dates.
Learn more about Amortization.
An establishment that handles the exchange and facilitation of money including the issuance of funds, extension of credit and transmitting funds from one place to another.
I have a checking account and savings account with my local bank.
Learn more about Bank.
A legal proceeding, usually initiated by the debtor, which can result in a finding that the debtor is unable to pay their debts and a court order managing the resolution of the debts.
Many Americans filed for bankruptcy during the 2008 financial crisis.
Learn more about Bankruptcy.
Additional perks or amenities provided by a business to a consumer or employee. Company loyalty benefits can include reward programs, while employer benefits can include paid health insurance, etc.
The benefits of working with one lender actualize in regular discounts on their products.
Learn more about Benefits.
Better Business Bureau (BBB)
A North American organization aimed to increase consumer confidence by fostering honest business practices between businesses and consumers to create a trustworthy marketplace.
Net Pay Advance is a proud long-term member of the Better Business Bureau.
Learn more about Better Business Bureau (BBB).
Shortened term meaning “web log.” Series of articles published online that relate to typical topic and provide information to readers.
Visitors can find financial tips and more on the Net Pay Advance blog.
Learn more about Blog.
A planned forecast of expenses for a certain time period based on income available.
Each month, I set my financial budget based on how much money I have available.
Learn more about Budget.
Credit Access Business (CAB) License
Credit services organizations that obtain or assist consumers in obtaining extensions of consumer credit in the form of deferred presentement transactions or motor vehicle title loans.
Businesses wishing to obtain a CAB license must submit an application.
Learn more about Credit Access Business (CAB) License.
A type of loan product that is taken against an upcoming paycheck. Sometimes referred to as a “payday loan.”
Due to an unforeseen expense, I applied for a cash advance to cover the amount I needed between pay periods.
Learn more about Cash Advance.
Consumer Financial Protection Bureau (CFPB)
An independent agency within the Federal Reserve System that looks out for the financial interests of American consumers.
The CFPB was created under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Learn more about Consumer Financial Protection Bureau (CFPB).
An expense or fee applied to a product or service as part of the total owed by the customer to the business.
Heidi paid an ATM fee since she wasn’t using her bank’s ATM to make a withdrawal.
Learn more about Charge.
A bank account in which the account holder can draw and deposit funds through checks or a debit card.
Net Pay Advance requires all applicants to supply their checking account information on their loan application.
Learn more about Checking Account.
Something a borrower of a loan uses as a pledge or promise to repay a loan.
My mortgage is a loan that uses my home as collateral against the debt.
Learn more about Collateral.
To give permission to a business to intiate interactions with you via phone, email, text or other methods of communication in order to conduct functions of the business agreement.
I opted-in to communications from Net Pay Advance so that I would receive information about my loan due date, and other important information.
Learn more about Communications Opt-In.
Information from a business providing consumers with details of business policies that may impact a consumer.
Learn more about Consumer Disclosure.
A binding agreement between two or more parties. Often a written document that requires a signature from each party.
During the application process, I signed the loan contract so that I could receive my approved funds.
Learn more about Contract.
An amount or positive balance available to a person’s disposal from a financial institution or business.
My line of credit limit is $1000, which means I have $1000 credit available to use.
Learn more about Credit.
A loan where the amount borrowed is held in a bank account while you make payments. These loans are designed to help build credit by showing a good repayment history.
John decided to take out one of those credit-builder loans to help establish a positive credit history, even though he had no prior credit experience.
Learn more about Credit-Builder Loans.
A private institution that assembles consumer financial information that can be used by verified businesses to make application decisions.
The three main credit bureaus are TransUnion, Experian and Equifax.
Learn more about Credit Bureau.
A physical or digital card that authorizes purchases on credit with interest accruing on the principal balance.
I recently applied for a credit card and was approved with a credit limit of $1000!
Learn more about Credit Card.
The act of a business or lending institution reviewing an applicant’s creditworthiness by requesting information from a credit bureau to make a decision.
Traditional loan applications typically require a hard credit check by the lender.
Learn more about Credit Check.
The act of taking one loan out to repay multiple debts at once, with the result being one larger loan with more favorable payment terms.
She considered the pros and cons of a credit consolidation loan to manage her multiple debts.
Learn more about Credit Consolidation.
An ongoing, detailed record of a person’s management of credit.
Carlos has a car loan that is recorded in his credit history.
Learn more about Credit History.
The process of fixing poor credit standing.
She attended a seminar on credit repair in order to improve her financial situation.
Learn more about Credit Repair.
A detailed summary of an individual’s credit history that is prepared by a credit bureau to reflect that borrower’s creditworthiness.
Consumers are entitled to a free credit report by each of the three bureaus once per year.
Learn more about Credit Repair.
A number between 300-850 that represents an individual’s creditworthiness based on a number of factors.
The higher your credit score, the better your chances at being approved for credit.
Learn more about Credit Score.
How suitable a person is deemed to receive financial credit, often based on their credit history.
She was offered a new credit card based on her creditworthiness.
Learn more about Creditworthiness.
Credit Services Organization (CSO) Lender
A licensed company that earns compensation by helping borrowers obtain loans from third-party lenders.
The company described themselves as the best CSO lender in the country.
Learn more about Credit Services Organization (CSO) Lender.
A single place where customer information is centralized, such as billing and contact information.
Users can create their customer account at checkout.
Learn more about Customer Account.
A payment card that deducts money from a consumer’s checking account when used to make purchases.
He preferred to make purchases with his debit card.
Learn more about Debit Card.
Failure to fulfil a legal obligation, especially to repay a loan.
When I defaulted on my payments, I was unable to secure additional credit.
Learn more about Default.
An amount of money placed in a bank account, or a first installment on a purchase.
I deposited $500 into my bank account earlier this month.
Learn more about Deposit.
California Department of Federal Protection and Innovation (DFPI)
A quasi independent government agency within the Federal Reserve system with regulatory and oversight powers over consumer financial products and services.
In January, the DFPI remided its licensees to submit their annual reports.
Learn more about California Department of Federal Protection and Innovation (DFPI).
When funds are deposited electronically into a bank account.
The fees were waived since I used direct deposit.
Learn more about Direct Deposit.
A financial entity that provides loans without intermediaries.
They were rated as one of the best direct lenders in the state.
Learn more about Direct Lender.
A deduction from the usual price of something.
Brandon bought his new suit when it was available with a discount.
Learn more about Discount.
Due Date Extension
A deferred repayment date falling a specified number of days after the original terms, subject to conditions.
I had to file for a due date extension because I needed more time to make a payment.
Learn more about Due Date Extension.
Equal Credit Opportunity Act (ECOA)
A law in the United States that prohibits lenders from considering personal factors that are unrelated to a person’s ability to repay the debt when reviewing an application or credit.
Lenders can not use personal information that does not impact the applicant’s ability to repay when making a decision to approve or deny a loan request.
Learn more about Equal Credit Opportunity Act (ECOA).
Fixed prices one pays for a service.
Instead of charging by the hour, the company has one flat fee for using its services.
Learn more about Fees.
A credit score calculated with software from the Fair Isaac Corporation (FICO).
The lender looked at her FICO score to make a decision.
Learn more about FICO Score.
An open-ended line of credit that gives you access to cash.
When faced with unexpected medical expenses, Jane considered applying for a flex loan, which offered her a more flexible repayment schedule compared to traditional loans.
Learn more about Flex Loan.
A labor market where large numbers of people work in freelance or temporary positions, rather than permanent jobs.
The driver found frequent work in the gig economy as a driver for Uber.
Learn more about Gig Economy.
Taxes imposed on consumer goods that are not visible to the taxpayer because they are included in the price of the item.
Some common examples of hidden taxes are found in things like gas, hotel rooms, alcohol, and gambling.
Learn more about Hidden Taxes.
Home Equity Line of Credit
A line of credit that is secured with the equity of one’s home.
Sarah decided to take advantage of her home ownership and sought a Home Equity Line of Credit to finance the remodel of her home.
Learn more about Home Equity Line of Credit.
Home Loans (Mortgage)
A loan used to secure a home or other type of real estate.
The agency announced that fees for home loans would increase by about 1% starting in April.
Learn more about Home Loans (Mortgage).
Identity Theft or Identity Fraud
Terms used to refer to when someone uses another person’s personal data illegally, typically for economic gain.
My aunt became a victim of identity theft when she went along with a fraudulent caller’s requests.
Learn more about Identity Theft/Identity Fraud.
A sum of earnings received in a given period of time.
Shireen gets most of her income from freelance work.
Learn more about Income.
A type of loan where you borrow a lump sum and then repay it with a set number of scheduled payments over time.
I pay back my student loans as installment loan payments.
Learn more about Installment Loan.
Instant Bank Verification (IBV)
A secure method for applicants to share a snapshot of their bank account information to a lender. Typically used during the application process as a method to approve an application for credit.
For applicants that Net Pay Advance is unable to make an instant decision on their application, customer service will ask the customer to complete an IBV.
Learn more about Instant Bank Verification (IBV).
A deposit type that utilizes a valid debit card to faciliate fund transfers in seconds.
When my application was approved, I received instant funding because I supplied a valid debit car.
Learn more about Instant Funding.
The supply and demand for employment.
After the Great Resignation in 2020-2021, changes in the job market resulted in the number of job openings increasing significantly.
Learn more about Job Market.
A statistic reported by the US Department of Labor that measures how many individuals filed for unemployment benefits each week.
When jobless claims hit a 50-year low, it was a positive sign for the economy.
Learn more about Jobless Claims.
When the economy experiences growth after a recession, but the unemployment rate remains high.
Economists say that young workers who enter the job market during a jobless recovery are more likely to experience limited opportunities.
Learn more about Jobless Recovery.
A statistic measured by the Bureau of Labor Statistics (BLS) that tracks how many jobs are added to the US economy each month.
Overall jobs growth in retail remains on a healthy track and shows no signs of slowing.
Learn more about Jobs Growth.
Joint Credit Card
A type of credit card that is issued to two or more people based on their combined finances.
A joint credit card gives people with low credit scores the option to get access to funds and can help build their credit.
Learn more about Joint Credit Card.
Kansas Office of the State Banking Commissioner (OSBC)
An agency that regulates all state-chartered banks, trust companies, mortgage businesses, supervised lenders, credit service organizations, and money transmitters that do business in the State of Kansas.
The Kansas OSBC issued guidance on new security provisions.
Learn more about Kansas Office of the State Banking Commissioner (OSBC).
Line of Credit
A type of loan product from a financial institution that consists of a defined credit limit that a borrower can access as needed and repay immediately or over time.
She applied for a new line of credit to cover her home repair costs.
Learn more about Line of Credit.
An extension of credit from one party to another, typically between a banking institution or lender and borrower.
I was able to secure a loan to help cover some unexpected expenses.
Learn more about Loan.
A contract to formalize a loan process that lists the promises made between a borrower and a lender.
The loan agreement would protect both sides if the matter had to go to court.
Learn more about Loan Agreement.
A series of questions related to personal information and finances of an applicant that are submitted and reviewed to determine approval.
Net Pay Advance loan application is online and can be completed in less than 5 minutes!
Learn more about Loan Application.
A computer program or software application designed to run on a mobile device.
She wanted a lender that had a mobile app for easy use.
Learn more about Mobile App.
Nonsufficient Funds (NSF) Fee
The amount a financial institution charges when there is not enough money in an account to process a transaction.
A study found that the average NSF fee was $33.58.
Learn more about Nonsufficient Funds (NSF) Fee.
A type of loan where the entire lending process is transacted through a website.
When looking for an online loan, do research to find a reputable company.
Learn more about Online Loan.
A loan that has not reached its due date or has yet to be repaid.
Sarah has an open loan with Net Pay Advance.
Learn more about Open Loan.
Open-ended Term Loan
A loan that does not have a fixed end date.
Ray found an open-ended term loan through a different lender.
Learn more about Open-ended Term Loan.
A term that refers to a payment that has not been made by its outlined due date.
The water bill was three days past due.
Learn more about Past Due.
Paycheck to Paycheck
An expression that means a person’s paycheck is used to cover their necessary expenses with no money left over. Often, their paycheck only lasts until their next payday.
Despite working full-time, Gabby found herself living paycheck to paycheck, struggling to cover her unexpected expenses without any savings to fall back on.
Learn more about Paycheck to Paycheck.
The defined time intervals at which an employee gets paid, complying with laws and regulations.
My employer switched to a semimonthly pay cycle from a weekly pay cycle.
Learn more about Pay Cycle.
To eliminate a debt by paying all that is owed.
I was able to earn some extra money so that I could pay off my loan.
Learn more about Pay Off.
A short-term loan that is designed to help people cover emergency expenses between paychecks.
Bad credit will not be likely to disqualify you from a payday loan.
Learn more about Payday Loan.
Payday Loan Direct Provider
A party who facilitates the transfer of funds from the ultimate lender to the ultimate borrower and remains involved in the transaction from start to finish.
She found a payday loan direct provider to get a loan in Houston.
Learn more about Payday Loan Direct Provider.
The tender of money to someone in exchange for goods or services or to fulfil a legal obligation.
In over 17 years, I only made one late payment.
Learn more about Payment.
A process through which the amount to be paid is verified from the outlined payment method.
Before running my payment, the business performed a payment authorization.
Learn more about Payment Authorization.
The management of one’s own financial activities such as personal banking, savings, investments, budgets, etc.
I am focused on improving my personal finances this year by starting a budget.
Learn more about Personal Finance.
A loan that is taken by the borrower for personal use and is typically a smaller amount than a mortgage with a shorter repayment period.
I took out a personal loan to cover the repairs that my car required.
Learn more about Personal Loan.
A credit or debit card that is not linked to an associated bank account but where the card holder adds money to the card before spending.
I put $100 on my prepaid card to use at the grocery store this month.
Learn more about Prepaid Card.
A statement or legal document that discolses the ways that a party gathers, uses, and manages a customer’s data.
Abbreviated term for “promotional code,” which is a specific word or series of numbers that will apply a discount when applied during checkout or application.
Net Pay Advance customers can earn a promo code through the NPA Rewards Program.
Learn more about Promo Code.
The estimated cost of a job or service.
After assessing the job, the landscaping company gave Mr. Wheeler a quote for its lawn services.
Learn more about Quote.
Sharing information about a business to your peers, some referrals are compensated with a reward from the business.
Since I referred over 10 people to shop at this business, I was awarded a 50% discount on my next purchase as part of their referral program.
Learn more about Referral.
Refinancing Payday Loans
The process of taking out a new loan to pay off an existing payday loan. There are risks and benefits to this option – weigh your options carefully.
John decided to explore the option of refinancing payday loans to lower his monthly payments and reduce the overall cost of borrowing.
Learn more about Refinancing Payday Loans.
Repayment of a sum of money, typically because of customer dissatifaction of goods or services rendered.
The shoes that I purchased online did not fit, so I returned them for a refund to my account.
Learn more about Refund.
A type of credit that has no fixed payoff date where borrowers can draw up to their credit limit, repaying the amount plus interest to continue borrowing.
Most credit cards structures are revolving credit lines of credit.
Learn more about Revolving Credit.
The event of rolling over the principal that is due plus a fee into a new loan, rather than paying the full amount on your due date.
I wasn’t able to cover my payment this month, so I paid a small fee to rollover the balance until next month when I can repay the balance.
Learn more about Rollover.
A sum of money that is accumulated for later purpose after all required payments have been made.
We are building up our savings so that we can put a down payment on a new home.
Learn more about Savings.
A specific account that is used for storing saved funds with the purpose that accrued funds are not used in day-to-day transactions.
I set up a savings account so that I would not be tempted to spend the money I have saved.
Learn more about Savings Account.
A dishonest scheme used to defraud others without their knowledge, typically for the purpose of making quick money.
Be leary of releasing your personal information to anyone without vetting their legitimacy as it could be a scam.
Learn more about Scam.
An extension of credit that is secured by collateral pledged by the borrower which the lender can sell to cover repayment of the loan if the borrower is unable to repay.
My new vehicle was collateral for the secured loan that I received from the bank.
Learn more about Secured Loan.
Earning income based off one’s personal skills or personally-owned business.
Bill is self-employed after opening up his auto body shop.
Learn more about Self-employed.
An agreement between two parties to negotiate the closure of a deal or agreement.
I received a settlement offer from a lending institution.
Learn more about Settlement.
A type of lending instituion that specializes in credit agreements that are less than one year.
The short-term lender considered Zeke’s application for a loan.
Learn more about Short-Term Lender.
Single-Pay Payday Loan
A small short-term loan that is designed to be a solution for emergency expenses between pay periods and repaid in one lump sum on the borrower’s next paycheck.
Farah had a positive experience with her single-pay payday loan because she knew exactly when her one-time payment was due, which made it easier for her to budget.
Learn more about Single-Pay Payday Loan.
To be granted the legal authority to practice a profession within a designated scope by a state. Net Pay Advance is licensed in multiple states as an online payday loans provider.
Carly chose a state-licensed lender when she decided to take out a payday loan for her vet bill.
Learn more about State-Licensed.
A document displaying the financial activities of a person, business, or entity.
I received my monthly credit card statement earlier this week.
Learn more about Statement.
A document that is filed with a tax authority that outlines reported income, expenses and other relevant financial information, typically done on an annual basis.
You have to fill out your tax return by next month.
Learn more about Tax Return.
Texas Office of Consumer Credit Commissioner (OCCC)
A Texas state agency that regulates nonbank lenders in the state of Texas.
Consumers in Texas can send complaints to the OCCC.
Learn more about Texas Office of Consumer Credit Commissioner (OCCC).
Truth in Lending Act (TILA)
A federal law that protects consumers from unfair credit practices by requiring information to be disclosed to borrowers conscpicuously.
I reviewed the TILA within the loan documents for the loan I received.
Learn more about Truth in Lending Act (TILA).
The process a lender uses to determine if a borrower is eligible for a loan.
Underwriting a personal loan can be completed in minutes using software.
Learn more about Underwriting.
The term for when a person who is actively seeking employment cannot find work.
The unemployment rate rose during the coronavirus pandemic.
Learn more about Unemployment.
Short for “video blog.” A form of blogging where the medium is video.
I recently started my own vlog about cooking on a budget!
Learn more about Vlog.
The electronic movement of funds across a network of banks or transfer agencies.
Wire transfers are more convenient than checks for many people, although banks may apply fees to them.
Learn more about Wire Transfer.
Earnings generated on an investment over a specific period of time.
The yield on an investment will usually be expressed as an annual percentage rate.
Learn more about Yield.