Unsecured Loan Glossary of Terms - l

Using long-term debt to secure a loan for an organization. In the social investment world, often refers to financial participation by other private, public or individual sources.
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Total value of financial claims on a firm's assets. Equals total assets minus net worth.
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Limitation of shareholders' losses to the amount invested.
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Rights only to specifically stipulated assets to satisfy an unpaid debt.
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Agreement by a bank that a company may borrow at any time up to an established limit.
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A deposit in an account with a financial institution to induce that institution's support for one or more projects. By accruing no interest or low interest on its deposit, a foundation essentially subsidizes the interest rate of the project borrowers.
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A written contract between a lender and a borrower that sets out the rights and obligations of each party regarding a specified loan (unsecured loan or a secured loan).
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A document in which a prospective borrower details his or her financial situation to qualify for a loan. Filling out a loan application does not guarantee a loan.
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Enables a student borrower to combine various educational loans into one new loan, extending the repayment period (up to 30 years depending on the loan amount) and allowing a single monthly payment for the loan which is often lower than the sum of the multiple payments.
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All of the steps required to initiate a loan from application to final approval and disbursement.
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That portion of a fund's earnings or permanent capital designated by the board of directors as a reserve against possible loan losses and, as such, unavailable for lending purposes. Generally accepted accounting principles governing for-profit and regulated financial institutions require that loan loss expense be deducted as an annual expense on an accrual basis and that the loan loss reserve be shown as a contra asset reducing loan assets. To date, no accounting convention has been established to govern loan loss reserve accounting for unregulated nonprofit institutions. The technical treatment is to establish the reserve through periodic charges against earnings, and actual losses, when and if incurred, and are charged against the reserve. For balance sheet purposes a loan loss reserve (should) be shown as a deduction from the loan portfolio to suggest that its true economic value should be reduced by the estimated loss exposure.
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