Acceleration clause A stipulation in a loan contract stating that the entire balance becomes due immediately if other contract conditions are not met.

Accrued interest Interest that has been earned but not received or recorded.

Amortization Liquidation of a debt by making periodic payments over a set period, at the end of which the balance
is zero.

Annuity A series of equal payments made at regular intervals, with interest compounded at a specified rate.

Appreciation An increase in the value or price.

Asset Anything an individual or
business owns that has commercial or exchange value.

Balance The amount owed on a
loan or credit card or the amount in a savings or investment account.

Balance sheet A financial statement showing a “snapshot” of the assets, liabilities and net worth of an individual or organization on a given date.

Bankruptcy A legal proceeding declaring that an individual is unable to pay debts. Chapters 7 and 13 of the federal bankruptcy code govern personal bankruptcy.

Budget An itemized summary of
probable income and expenses for a given period.

Capital Cash or other resources
accumulated and available for use in
producing wealth.

Cash flow Money coming to an
individual or business less money
being paid out during a given period.

Certificate of deposit (CD) A type of savings account that earns a fixed interest rate over a specified period of time.

Collateral Assets pledged to securea loan.

Common stock A kind of ownership in a corporation that entitles the investor to share any profits remaining after all other obligations have been met.

Compound interest Interest computed on the sum of the original principal and accrued interest.

Credit The granting of money or
something else of value in exchange for a promise of future repayment.

Credit bureau An organization that compiles credit information on individuals and businesses and makes it available to businesses for a fee.

Credit card A plastic card from a
financial services company that allows.cardholders to buy goods and services
on credit.

Credit rating An estimate of the
amount of credit that can be extended to an individual or business without
undue risk.

Credit report A loan and bill payment
history, kept by a credit bureau and
used by financial institutions and
other potential creditors to determine
the likelihood a future debt will be
repaid.

Credit union A cooperative organization that provides financial services to its members.

Creditor A person, financial institution or other business that lends money.

Debt Money owed; also known as a
liability.

Debt service Periodic payment of the principal and interest on a loan.

Debit Charges to an account.

Debit card A plastic card similar to a
credit card that allows money to be
withdrawn or the cost of purchases
paid directly from the holder’s bank
account.

Delinquency The failure to make
timely payments under a loan or other credit agreement.

Diversification The distribution of
investments among several companies to lessen the risk of loss.

Dividend A share of profits paid to a
stockholder.

Equity Ownership interest in an asset after liabilities are deducted.

Face value The principal amount
of a bond, which will be paid off at
maturity.

Fair market value The price a willing
buyer will pay and a willing seller will
accept for real or personal property.

Federal Deposit Insurance Corp.
(FDIC) A federally chartered corporation that insures bank deposits up to $100,000.

Finance company A company that
makes loans to individuals.

Financing fee The fee a lender charges to originate a loan. The fee is based on a percentage of the loan amount; one point is equivalent to 1 percent.

Foreclosure The legal process used to force the payment of debt secured by collateral whereby the property is sold to satisfy the debt.

401(k) plan A tax-deferred investment and savings plan that serves as a personal retirement fund for employees.

General obligation bond A type of
municipal bond backed by the full
faith and credit of the governmental
unit that issues it.

Individual development account (IDA)A type of savings account, offered in some communities, for people whoste income is below a certain level

Individual retirement account (IRA)  A retirement plan, offered by banks, brokerage firms and insurance companies, to which individuals can contribute each year on a tax deferred basis.

Industrial bond A financial instrument issued by businesses primarily to fund expansion or acquisitions.

Interest A fee for the use of money
over time. It is an expense to the borrower and revenue to the lender. Also, money earned on a savings account.

Interest rate The percentage charged for a loan, usually a percentage of the amount lent. Also, the percentage paid on a savings account.

Investor An organization, corporation, individual or other entity that acquires an ownership position in an investment,
assuming risk of loss in
exchange for anticipated returns.

Installment plan A plan requiring a
borrower to make payments at specified
intervals over the life of a loan.

Investing The act of using money to make more money.

Leverage The ability to use a small amount of money to attract other funds, including loans, grants and equity investments.

Liability Money an individual or
organization owes; same as debt.

Lien A creditor’s claim against a property,
which may entitle the creditor to
seize the property if a debt is not
repaid.

Liquidity The ease with which an investment can be converted into cash.

Load The fee a brokerage firm charges an investor for handling transactions.

Loan A sum of money lent at interest.

Management fee The fee paid to a company for managing an investment portfolio.

Market value The amount a seller can expect to receive on the open market for merchandise, services or securities.

Maturity The time when a note, bond or other investment option comes due for payment to investors.

Money market savings account A type of savings account offered by a financial institution.

Mortgage A temporary and conditional pledge of property to a creditor as security for the repayment of a debt.

Municipal bond A bond issued by cities, counties, states and local governmental agencies to finance public projects, such as construction of bridges, schools and highways.

Mutual fund A pool of money managed by an investment company.

Net worth The difference between the total assets and total liabilities of an individual.

Par value The nominal, or face, value of a stock or bond, expressed as a
specific amount on the security.

Pretax A person’s salary before state and federal income taxes are calculated.

Predatory lending Targeting loans to elderly, low-income and other people to take advantage of their financial status or lack of financial knowledge.

Prime rate The lowest interest rate on bank loans, offered to preferred borrowers.

Principal The unpaid balance on a loan, not including interest; the amount of money invested.

Promissory note A written promise on a financial instrument to repay the money plus interest.

Qualified plan A tax-deferred
retirement plan for the self-employed. Risk The possibility of loss on an investment.

Return The profit made on an
investment.

Revenue bond A type of municipal bond backed by revenue from the project the bond finances.

Savings account A service depository institutions offer whereby people can deposit their money for future use and
earn interest.

Stockholder A person who owns stock in a company and is eligible to share in profits and losses; same as shareholder.

Tax-deferred Phrase referring to
money that is not subject to income tax until it is withdrawn from an account, such as an individual retirement account or a 401(k) account.

Term The period from when a loan is made until it is fully paid.

Terms Provisions specified in a loan agreement.

Treasury bill A short-term investment issued by the U.S. government for a year or less.

Treasury bond A government security with a term of more than 10 years; interest is paid semiannually.

Treasury note A government security with a maturity that can range from two to 10 years; interest is paid every six months.

U.S. savings bond A nontransferable, registered bond issued by the U.S. government in denominations of $50
to $10,000.