Glossary of Unsecured Loan Terms - d

The cost of credit on a business loan or personal loan per day reached by dividing the annual percentage rate by 365.
Back to Top

An amount owed for funds borrowed. The debt may be owed to an organization's own reserves, individuals, banks, or other institutions. Generally, the debt is secured by a note, bond, mortgage, or other instrument that states repayment and interest provisions. The note, in turn, may be secured by a lien against property or other assets.
Back to Top

The replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. It's also called a consolidation loan
Back to Top

Amount of payment due regularly to meet a debt agreement; usually a monthly, quarterly or annual obligation.
Back to Top

Term used to refer to cash reserves set aside by a borrower, either by internal policy or lender covenant, to repay debt in the event that cash generated by operations is insufficient.
Back to Top

Technically, a person who has filed a petition for relief under the bankruptcy laws. More generally, anyone who owes
Back to Top

The amount of money a person has in outstanding debt, compared to the amount of credit available on all of the individual's credit cards and credit lines. The higher a person's debt to available credit, the more risky the individual appears to potential lenders when applying for a loan.
Back to Top

The percentage of before-tax earnings that are spent to pay off loans for obligations such as auto loans, student loans and credit card balances. Lenders look at two ratios. The front-end ratio is the percentage of monthly before-tax earnings that are spent on house payments (including principal, interest, taxes and insurance). In the back-end ratio, the borrower's other debts are factored in.
Back to Top

A failure to discharge a duty. The term is most often used to describe the occurrence of an event that cuts short the rights or remedies of one of the parties to an agreement or legal dispute, for example, the failure of the mortgagor to pay a mortgage installment, or to comply with mortgage covenants.
Back to Top

Interest payments that are delayed for the borrower during a specified period and paid at a later time.
Back to Top

In a monetary context, something that has been made payable and is overdue and unpaid,
Back to Top

The status of a loan or credit card account resulting from failure to make consistent and timely monthly payments.
Back to Top

The release of a borrower from the obligation to repay his or her loan.
Back to Top

Refers to the task of carefully confirming all critical assumptions and facts presented by a borrower. This includes verifying sources of income, accuracy of financial statements, value of assets that will serve as collateral, the tax status of the borrower and any other material facts presented by the borrower.
Back to Top