Today Cash Glossary: Personal Loan Terms A to Z

Terms from A to C cover how payments are scheduled, how APR is calculated and how your credit file is built, which are the three areas that most affect what a personal loan costs you.

Amortization

The process of paying off a loan through equal scheduled payments that cover both interest and principal. Early payments go mostly toward interest, and later payments go mostly toward principal. An amortization schedule lists exactly how each payment is split.

Annual percentage rate (APR)

The yearly cost of borrowing, including interest and certain required fees, expressed as a percentage. Because it bundles those costs together, APR is the best single figure for comparing two loan offers of the same amount and term. Typical APRs for loans of $500 to $5,000 run about 8% to 35.99%.

Application

The formal request a lender reviews to decide whether to lend to you. When you use our request form, your details are shared with lenders who may then ask you to complete their own application. Each lender makes its own decision.

Autopay

An arrangement where loan payments are drawn automatically from your checking account on each due date. It helps you avoid late fees, and some lenders lower the rate slightly when you enroll. Keep enough in the account to cover each draft.

Balloon payment

A large lump-sum payment due at the end of some loans, after a series of smaller payments. Most fixed-rate personal loans do not use one, because they are fully amortized. If an agreement mentions a final payment far larger than the others, ask about it before signing.

Bankruptcy

A federal court process that can reduce or wipe out certain debts when a person cannot repay them. It stays on a credit report for years and makes new borrowing harder and more expensive. Lenders ask about recent bankruptcies during review.

Charge-off

An accounting step a lender takes when it decides a debt is unlikely to be repaid, usually after months of missed payments. You still owe the balance, and the account may be sold to a collection agency. A charge-off is a serious negative mark on a credit report.

Co-borrower

A second person who applies for a loan with you and shares equal responsibility for repaying it. Both incomes and credit histories are considered, which can improve the offer. Both people's credit is affected by how the loan is paid.

Co-signer

A person who agrees to repay your loan if you do not, without receiving the money. A co-signer with strong credit can help an applicant with thin credit, but the debt appears on both credit reports. Not every lender accepts co-signers.

Collateral

An asset, such as a car or savings account, that a borrower pledges to secure a loan. If the loan is not repaid, the lender can take the collateral. Most personal loans in the $500 to $5,000 range are unsecured and require no collateral.

Collections

The stage when an unpaid debt is handed to an internal team or outside agency to recover the money. A collection account can lower a credit score significantly. Federal law limits how debt collectors may contact you.

Credit report

A record of your borrowing and repayment history kept by the three national credit bureaus. It lists accounts, balances, payment history and inquiries. You can review your reports free and dispute any errors you find.

Credit score

A three-digit number, usually between 300 and 850, that summarizes the risk shown in your credit report. Lenders use it to decide whether to offer a loan and at what APR. Scores of 720 to 850 are generally called excellent.

Credit utilization

The share of your available revolving credit that you are currently using. Someone with $1,500 owed on cards with a $3,000 total limit has 50% utilization. Lower utilization generally supports a higher score.

APR and credit score work together. Our personal loan rates guide shows typical APR ranges for each credit tier, from excellent to below 630, so you can see where a today cash request might land.

Terms from D to F explain how lenders measure your budget, what happens when payments are missed, and how the interest on a personal loan is set and charged over the life of the loan.

Debt consolidation

Using one new loan to pay off several existing debts, leaving a single monthly payment. It can save money when the new APR is lower than the old ones. It works best when you avoid running the old balances back up.

Debt-to-income ratio (DTI)

Your total monthly debt payments divided by your gross monthly income, shown as a percentage. A person with $900 in payments and $3,000 in income has a DTI of 30%. Lenders use it to judge whether a new payment fits your budget.

Default

Failing to repay a loan as the agreement requires, typically after a set number of missed payments. Default can trigger collection activity, extra fees and lasting credit damage. Contacting the lender early about a hardship can sometimes prevent it.

Direct deposit

An electronic transfer of money straight into your bank account. Most lenders send personal loan funds this way, often as soon as the next business day after you sign. Timing depends on the lender and your bank.

Due date

The day each loan payment must reach the lender to count as on time. Some lenders let you choose or change it so it lines up with the day your income arrives. Missing it can lead to a late fee once any grace period ends.

Early payoff

Paying off a loan in full before the final scheduled payment. With simple-interest personal loans, early payoff reduces the total interest you pay. Check whether the agreement includes a prepayment penalty first.

Finance charge

The total dollar cost of credit, including interest and certain fees, as shown on your Truth in Lending disclosure. On the representative $1,000 loan over 18 months at 27.99% APR, the interest portion is about $236.06. It answers the question of how much borrowing will cost in dollars.

Fixed rate

An interest rate that stays the same for the full term of the loan. Your monthly payment does not change, which makes budgeting simpler. Most loans in our range use fixed rates.

People who want to combine card balances into one payment can read our debt consolidation loans guide, which works through example payments, such as $2,000 over 18 months at about $137.34 a month.

Terms from G to L describe the type of credit check a lender runs, how interest is calculated, and the structure of installment loans and lines of credit, which are the two most common borrowing formats.

Grace period

A short window after the due date during which a payment is accepted without a late fee. Not every personal loan has one, and its length varies by lender and state. The agreement states whether it applies.

Gross income

Your income before taxes and other deductions are taken out. Most lenders ask for gross monthly income on a request and use it to calculate your debt-to-income ratio. Enter the amount you can document.

Hard inquiry

A full credit check a lender runs when you formally apply or accept an offer. It can lower your score slightly for a short time and appears on your report to other lenders. Several inquiries for the same loan type in a short window are often treated as one.

Installment loan

A loan repaid in a fixed number of scheduled payments over a set term. Most personal loans are installment loans. Each payment covers interest plus part of the principal until the balance reaches zero.

Interest

The price a lender charges for letting you use its money, paid on top of the amount borrowed. On most personal loans it is calculated on the remaining balance, so it falls as you pay the loan down. Shorter terms mean less interest overall.

Interest rate

The percentage used to calculate interest on your balance, not including fees. It can be lower than the APR on the same loan when the lender also charges an origination fee. Use APR, not the interest rate, to compare offers.

Late fee

A charge added when a payment is not received by the due date or the end of the grace period. The amount and rules are set in the agreement, within limits that many states impose. Autopay is one simple way to avoid it.

Line of credit

A revolving credit limit you can draw from, repay and draw again, paying interest only on what you use. It offers flexibility but payments can change month to month. An installment loan, by contrast, gives you one lump sum with a fixed schedule.

Loan agreement

The legally binding contract between you and the lender that sets out the amount, APR, payment schedule, fees and your rights. Read it fully before you sign, including the sections on late payments and early payoff. Save a copy for your records.

Loan term

The length of time you have to repay a loan, usually stated in months. Terms for loans in our range typically run 6 to 36 months. A longer term lowers the payment but raises the total interest.

The trade-off between term and cost is easiest to see in numbers. A $1,000 loan at 27.99% APR costs about $96.50 a month over 12 months, versus about $68.67 a month over 18 months, but the shorter term saves roughly $78 in interest. Try your own figures in the personal loan calculator, or read our installment loans guide for more on fixed schedules.

Terms from M to P cover the fees most likely to appear on a personal loan, the federal protections for service members, and the paperwork lenders use to confirm what you earn before they make an offer.

Military Lending Act (MLA)

A federal law that protects active-duty service members and their dependents from high-cost consumer credit. It caps the all-in cost of many loans and bans certain contract terms. Lenders check MLA status during review.

Minimum payment

The smallest amount you must pay on a revolving account, such as a credit card, to stay in good standing. Paying only the minimum can stretch a balance out for years and add a lot of interest. Personal loans use fixed payments instead.

Monthly payment

The fixed amount you pay each month on an installment loan, covering interest and principal. A $2,500 loan over 24 months at 27.99% APR has an estimated payment of about $137.21. Check that it fits your budget before you accept.

Net income

Your take-home pay after taxes and deductions. Lenders usually ask for gross income, but net income is what you actually budget with. Compare any new payment with your net income to see if it truly fits.

NSF fee

A non-sufficient funds fee charged when a payment is attempted but your account does not have enough money. Both the lender and your bank may charge one for the same failed payment. Contacting the lender before a due date you cannot meet can help avoid it.

Origination fee

A one-time fee some lenders charge for processing a loan, often taken out of the loan amount before it is deposited. It is included in the APR. Ask how much will actually reach your account.

Prepayment penalty

A fee some lenders charge if you pay off a loan early. Many lenders do not charge one, which lets you save interest by paying ahead. The agreement must disclose it if it applies.

Prequalification

An early look at whether a lender may lend to you and at what estimated terms, usually based on a soft inquiry. It is not a final decision, and the numbers can change after full review. It helps you compare without affecting your score.

Principal

The amount you borrow, not counting interest or fees. Each loan payment reduces the principal a little more as the term goes on. In the representative example, the principal is $1,000.

Proof of income

Documents that show what you earn, such as pay stubs, benefit letters, tax returns or bank statements. Lenders use them to confirm you can repay. Some lenders read your bank deposits electronically instead, with your permission.

Proof of income is just one item lenders review. Our eligibility requirements guide lists the documents and conditions most lenders look at before they respond to a today cash request.

Terms from R to S explain how payments are scheduled, the difference between secured and unsecured borrowing, soft credit checks, and why the state you live in shapes the offers you see.

Refinancing

Replacing an existing loan with a new one, usually to get a lower APR, a different term or a smaller payment. It can save money when your credit has improved. Compare the total cost of both loans, including any fees, before deciding.

Representative example

A sample loan that shows typical costs using real numbers, so you can understand pricing before you apply. Our representative example is $1,000 over 18 months at 27.99% APR, about $68.67 a month and $1,236.06 in total. It is an illustration, not an offer.

Repayment schedule

The list of every payment due on your loan, with dates and amounts. It shows how long repayment lasts and when the loan ends. Lenders usually include it in or alongside the loan agreement.

Revolving credit

Credit you can borrow, repay and borrow again up to a limit, such as a credit card or line of credit. The balance and payment change as you use it. High revolving balances raise your utilization and can lower your score.

Secured loan

A loan backed by collateral that the lender can claim if you do not repay. Secured loans can carry lower rates because the lender's risk is smaller. Auto loans and mortgages are common examples.

Soft inquiry

A credit check that does not affect your score and is not visible to other lenders. Many lenders use one to show initial loan terms. Checking your own credit is also a soft inquiry.

State licensing

The permission a lender needs from a state to make loans to its residents. States set their own rules on rates, fees, amounts and minimum age, which is 19 in Alabama and Nebraska and 18 elsewhere. A lender can only lend where it is licensed or otherwise permitted.

Terms from T to Z cover the total dollar cost of a loan, the federal disclosure that lists it, the review lenders run before deciding, and the difference between unsecured loans and variable-rate credit.

Total of payments

The full amount you will have paid once every scheduled payment is made, including principal and interest. For $4,000 over 36 months at 27.99% APR, it is about $5,955.48. It is the clearest measure of what a loan really costs.

Truth in Lending disclosure

A standardized federal form that shows a loan's APR, finance charge, amount financed and total of payments before you sign. Its fixed layout makes it easy to compare offers from different lenders. Read it side by side with the agreement.

Underwriting

The review a lender carries out to decide whether to approve a loan and on what terms. It covers your credit, income, debts and identity. Underwriting can be automated and quick, or take longer if documents are needed.

Unsecured loan

A loan that is not backed by collateral, approved mainly on your credit and income. Most personal loans are unsecured. Because the lender takes more risk, APRs can be higher than on secured loans.

Variable rate

An interest rate that can rise or fall over the life of the loan, usually tied to a market index. Payments can change as the rate moves. Most personal loans use fixed rates, but some lines of credit are variable.

Searches like get cash today or need cash today often lead to offers that look alike at first glance. Comparing the total of payments, alongside APR and fees, is the quickest way to tell which today cash offer from lenders in the network is truly cheaper.