Loan

Definition

  • An arrangement where one party gives money or an asset to another party in exchange for the promise of future repayment, often with interest.

Synonyms
debt, borrow, lend, advance, float, financing

Alternate Spellings
mortgage loan, moneylender

Related Terms and Acronyms

  • Amortized Loan Definition,
    • A loan that is completely paid off, interest and principal, by a series of regular payments that are equal or nearly equal.
  • Bridge Loan Definition,
    • A loan that "bridges" the gap between the purchase of a new home and the sale of the borrower's current home. The borrower's current home is used as collateral and the money is used to close on the new home before the current home is sold. Some are structured so they completely pay off the old home's first mortgage at the bridge loan's closing, while others pile the new debt on top of the old. They usually run for a term of six months.
  • Cap Definition,
    • A limit imposed on an item.
    • The top limit on the amount the interest rate can increase during a single time period of an adjustable-rate mortgage. Every ARM has two caps: a periodic cap, which limits the periodic changes to the interest allowed in the loan agreement, and a lifetime cap, which governs the total increase that can be imposed during the life of the loan.
  • Chattel Definition,
    • Personal property that can be moved.
  • Chattel Mortgage Definition, Important,
    • A loan backed by movable personal property. Generally mobile or trailer homes.
  • Commercial Loan Definition,
    • A loan taken out by a business.
  • Credit Risk Definition,
    • The risk of loss assumed under a financial contract that a borrower or a counter-party to a loan or other credit-related contract may default or fail to fulfill its obligations.
  • Debt-to-Income Ratio Definition,
    • The percentage of an individual's income that is used to repay debt.
  • Financing Expenses Definition,
    • Expenses sustained from interest payments, financing, and dividends to shareholders.
  • Firm Commitment Definition,
    • A lender's promise to lend money to a specific borrower on specified terms at a certain time.
  • Fixed Instalment Definition,
    • Periodic (usually monthly) payment on a loan whose sum does not vary.
  • Forbearance Definition,
    • Delaying foreclosure, usually because the borrower has arranged to pay the amount in arrears.
  • Foreclosure Definition,
    • The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
  • Full Income Verification Definition,
    • A requirement for fully documented proof of income; loans of this type usually offer lower interest rates than no-income or "no-doc" verification loans.
  • Guaranty Definition,
    • A promise to assume responsibility for a debt if the borrower defaults.
  • Home Loan Definition,
    • A loan used to buy a home is referred to as a "mortgage."
  • Interest (IN, int) Acronym & Abbreviation,
    • Money paid for the use of borrowed funds, usually expressed as an annual percentage.
    Bank account transaction code.
  • Interest Adjustment Date Definition,
    • The date one month prior to the beginning of amortization when accrued interest computed on the monies advanced becomes due.
  • Interest Factor Definition,
    • The decimal equivalent for an interest rate on a unit amount for a period of time. Computed by interest rate divided by number of days in a basic year times the number of days accrued.
  • Interest Only Payments Definition,
    • A payment plan where only the interest is paid off.
  • Interest Rate (IR) Acronym, Very Important,
    • The rate a lender charges an individual to borrow money.
  • Interest-Crediting Methods Definition,
    • A number of methods used to establish how interest is accrued, owed and dispersed to the parties due.
  • Interim Financing Definition,
    • The availability of funds on a daily basis to assist a developer with financing for a construction project between advances made by the lender of the construction loan.
  • Land Draw Definition,
    • A construction loan backed by the value of the land.
  • Late Charge Definition,
    • A fee imposed on a borrower for not paying on time
  • Late Payment Definition,
    • A sum a borrower sends to a lender that is received past the date when it was due.
  • Lender Definition,
    • The bank or mortgage company offering the loan.
  • Letter of Credit (L/C) Acronym,
    • A letter authorizing a person or company to draw on a bank or stating that the bank will honour the credit up to the stated amount.
  • Loan Application Definition,
    • A document in which a prospective borrower details his or her financial situation to qualify for a loan.
  • Loan Application Fee Definition,
    • A cost charged by a lender for processing loan application documents that are submitted by prospective borrowers.
  • Loan Commitment Definition,
    • A lender's promise to advance a specific sum on specific terms.
  • Loan Origination Definition,
    • The process of applying for a loan and the handling of that application by a lender.
  • Loan Processing Definition,
    • The steps taken by a lender to convert a loan application into an approved loan for the potential borrower. These steps include processing the application, conducting a credit investigation, evaluating the loan, etc.
  • Loan Servicing Definition,
    • Supervising a loan after it has been made. This could involve collecting payments, keeping accounting records, computing interest and principal, etc.
  • Loan Term Definition,
    • The period specified in the promissory note for a borrower to pay a loan, such as a mortgage. Most conventional mortgages have a loan term of 5 or 10 years.
  • Long-term Liabilities Definition,
    • Money owed over a period longer than 12 months, such as mortgages, bank loans, and other obligations.
  • Mortgage (mtg) Abbreviation, Important,
    • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
  • Mortgage Broker (MB) Acronym, Important,
    • One who finds clients perspective lenders at generally no cost. Mortgage Brokers have a special relationship with lenders and can offer their clients the best rates and service. CanEquity goes through great lengths to ensure you are serviced by the best Mortgage Brokers in Canada.
  • Mortgage Brokerage Definition, Very Important,
    • An individual or group who brokers deals between their clients and lenders.
    CanEquity is a mortgage brokerage.
  • Non-recourse Debt Definition,
    • A loan secured by collateral where the borrower is not personally liable.
  • One-year Adjustable Definition,
    • Mortgage whose annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by the lender.
  • Operating Loan Definition,
    • A loan intended for short-term financing, supplying cash flow support or to cover day-to-day operating expenses.
  • Original Principal Balance Definition,
    • The amount borrowed.
  • Origination Date Definition,
    • The date on which a loan is funded.
  • Origination Fee Definition,
    • The fee a lender charges to process a loan. It usually includes the cost to prepare loan documents, check a borrower's credit history, inspect the property and sometimes conduct an appraisal. CanEquity will in most cases use a lender who doesn't charge this fee or we will cover the cost in full.
  • Payday Loan Definition,
    • A short-term loan with an extremely high interest rate.
  • Personal Loan Definition,
    • A loan made for personal, family, or household use as opposed to a business-type loan or a long-term mortgage loan to finance real estate.
  • Policy Loan Definition,
    • A loan where a life insurance policyholder's death benefit is used as collateral.
  • Pre-approval Definition,
    • A process that mortgage lenders use to determine how much money they would lend you based on a thorough review of your financial situation. Lenders issue a pre-approval letter which strengthens your position when bidding on a home, as it shows sellers that you will be able to raise funds needed to purchase.
  • Pre-Approval Expiry Date Definition,
    • The date when a pre-approved mortgage expires, often 90 - 120 days after being pre-approved.
  • Pre-computed Loan Definition,
    • With a pre-computed loan, the interest owed over the life of the loan is calculated using a standard amortization table. After signing for this type of vehicle loan, the borrower is obligated to pay back principal plus the full amount of interest that will accrue over the entire term of the loan.
  • Pre-paid Interest Definition,
    • Interest that a borrower pays before it is due, usually to save taxes.
  • Pre-qualification Definition,
    • An informal process in which a lender will offer an opinion on how much money you may be able to borrow. This opinion is based entirely on the financial information you provide and is neither binding nor necessarily accurate because lenders have not yet verified your financial information.
  • Prime Lending Rate (PLR) Acronym, Very Important,
    • The rate of interest charged on loans by chartered banks to their most creditworthy customers.
    Bank of Canada's prime (best) lending rate.
  • Principal Definition,
    • The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
  • Principal and Interest (P&I, PI) Acronym,
    • Acronym for the elements of a mortgage payment: principal and interest.
  • Principal, Interest and Taxes (PIT) Acronym, Important,
    • Principal, interest and taxes. The components of a monthly mortgage payment.
  • Principal, Interest, Taxes, and Insurance (PITI) Acronym,
    • Acronym for the elements of a mortgage payment: principal, interest, taxes and insurance.
  • Private Lender Definition,
    • A lender not associated with a traditional lender.
  • Promissory Note (PN) Acronym,
    • A written promise to repay a loan by a specified time.
  • Provision for Credit Losses (PCL) Acronym, Canada,
    • The amount deducted from income equal to the amount by which a bank adjusts its loan balances to reflect anticipated losses on them.
    • A margin set by companies to compensate for losses due to unpaid credit.
  • Rebate Definition,
    • A manufacturer's reduction on the price of a car as an incentive to buyers. Rebates appeal to people with no credit or less-than-perfect credit who cannot qualify for the lowest-rate loan. A rebate may also appeal to first-time buyers who don't have a lot of cash for a down payment or another car to trade in.
  • Remaining Term Definition,
    • The time it will take to pay off the rest of an instalment loan as scheduled.
  • Retail Banking Definition,
    • Banking services offered to individual customers such as savings accounts, personal loans, cheque cashing, and RRSPs.
  • Roll In Loans Definition,
    • A refinancing loan that rolls any closing costs or fees into the loan. These programs best serve people who have a reasonable amount of home equity, want to reduce their overall interest expense, and plan to stay in their homes.
  • Secured Debt Definition,
    • A debt that is secured by a lien on debtor's property that may be taken by the creditor in case of non-payment by the debtor. A common example is a mortgage loan.
  • Secured Loan Definition,
    • Borrowed money that is backed by collateral.
  • Self Employed Person (SEP) Acronym,
    • A person who runs a trade or business, rather than working as an employee for someone else. You are self-employed if you are a sole proprietor or a partner working in a business. You can be an employee and self-employed at the same time if you have an independent business outside your regular employee hours. To qualify for many business tax exclusions and deductions, the enterprise must make a profit in three of five years. In most cases in order to qualify you must take and average of the last 2-3 years tax assessments.
  • Shared-Appreciation Mortgage (SAM) Acronym,
    • A home loan in which the lender offers a below-market interest rate in exchange for sharing in the profit when the home is sold. Usually done only with private funds/lenders.
    • A mortgage loan where the lender or a third-party backer agrees to offer a highly reduced mortgage rate to the borrower in exchange of sharing profits when the property is sold.
  • Simple Interest (SI) Acronym, Important,
    • Interest computed only on the principal balance, without compounding.
  • Simple Interest Loan Definition,
    • A method of allocating the monthly payment between interest and principal. The interest charged is determined by the unpaid principal balance on the loan, the interest rate, and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments reduces the loan's principal and cuts the total interest paid over the life of the loan.
  • Small- and Medium-sized Enterprises (SMEs) Abbreviation,
    • Limits banks place on businesses to determine there size.
    A term widely used by the World Bank and the World Trade Organization (WTO).
  • Solicitor Information Definition,
    • When you apply for a mortgage you will need a law firm with a lawyer's name and their contact information which would typically include the office location, phone number, fax number and e-mail address.
  • Spread Definition,
    • The difference between the interest rate charged to borrowers and the interest rate paid to depositors.
  • Standby Commitment Definition,
    • A commitment from a lender to make a loan in a specified period of time on specified terms with the understanding that the borrower will not likely draw down the funds.
  • Syndicated Loans Definition,
    • Loans given to a company that are backed by a group of banks who share the risk of a large transaction. There is usually a lead bank and several participating banks.
  • Teaser Rate Definition,
    • Often called the introductory rate, it is the below-market interest rate offered to entice customers to switch credit cards or lenders.
  • Third-party Originator Definition,
    • One who takes all or part of the mortgage application and transfers or sells it to a lender.
  • Total Annual Loan Cost (TALC) Acronym,
    • A method of finding the annual cost of a reverse loan.
  • Unaffiliated Investments Definition,
    • Investments in assets made by an insurance company where they have no control over the assets.
  • Unsecured Loan Definition,
    • An advance of money that is not secured by collateral.
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