Financial Glossary

Financial jargon can be quite overwhelming. Words that you've known all your life suddenly make no sense whatsoever in the context of finance. Some of them you may have even seen right here on this website. So we've taken the time to compile a list of terms that every member should know more about. Of course, if you still have questions, don't hesitate to pick up the phone. The representatives at our Call Center know all about this stuff and would be more than happy to explain it to you.


Automated Clearing House (ACH) |Back to Top|
Electronic transaction to/from any of your accounts

Adjustable Mortgage Loans (ARM) |Back to Top|
A mortgage loan or deed of trust, which allows the lender to adjust the interest rate in accordance with a specified index periodically and as agreed to at the inception of the loan.

Annual Percentage Rate (APR) |Back to Top|
Sometimes also called the interest rate. The yearly interest rate or percentage that one pays on an outstanding balance in the form of interest.

Amortization |Back to Top|
The process of fully paying off indebtedness by installments of principal and earned interest over a definite time.

Amortization Schedule |Back to Top|
The schedule of payments for paying off a loan.

Appraisal |Back to Top|
A professional opinion of an asset's market value as of a specific date.

Balance Transfer |Back to Top|
The process of moving an unpaid credit card balance from one issuer to another.

Collateral |Back to Top|
Also referred to as security. Property that is offered to secure a loan or other credit and that becomes subject to seizure on default.

Compound Interest |Back to Top|
Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods.

Cosigner |Back to Top|
Another person who signs for a loan and assumes equal liability for it.

Credit |Back to Top|
The promise to pay in the future in order to buy or borrow in the present. The right to defer payment of debt.

Credit Union |Back to Top|
A financial cooperative organizations of individuals with a common affiliation (such as employment, labor union membership, or place of residence). Credit unions accept deposits of members, pay interest (dividends) on them out of earnings, and primarily provide consumer installment credit to members. Click here to learn more about Industrial Federal Credit Union.

Credit History |Back to Top|
A record of how a person or company has borrowed and repaid debts, used as a guide to determine whether the consumer is likely to pay accounts on time in the future.

Default |Back to Top|
Failure to meet the terms of a credit agreement.

Discount Points |Back to Top|
Amount payable to the lending institution by the borrower or seller to increase the lender's effective yield. The more discount paid results to a lower interest rate; the less discount points paid results to a higher interest rate.

Dividend |Back to Top|
A share of earnings distributed to shareholders of a credit union

Electronic Funds Transfer (EFT) |Back to Top|
Electronic Funds Transfers are electronically initiated transfers of money from your account through the electronic funds transfer services described in IFCU's ATM and Check Card Agreement and Disclosure.

Electronic Signatures
(E-Signatures) |Back to Top|
The term 'electronic signature' means an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record (U.S. E-Sign Act - Section 106). However, for such an electronic "symbol" to be legally binding, it is important that the symbol provide authentication of the party who created it, ensure that what was signed cannot be altered, ensure that the party understood that by creating the symbol the party was willingly signing, and that the party is able to keep an original of the data and his/her electronic signature for his/her own records. Electronic signatures are legally recognized, even when a statute uses terms like "in writing" or "signed."

Escrow |Back to Top|
Money, documents, real estate or securities deposited with a neutral third party (the escrow agent) and then disbursed upon fulfillment of certain established conditions. The escrow agent's role is to protect either side of a transaction from the other side's unauthorized use of funds and to ensure an arms-length transaction between buyer and seller.

Equity |Back to Top|
In real estate, the difference between fair market value and current indebtedness; also referred to as the owners interest.

FHA Loan |Back to Top|
A loan insured by the Federal Housing Administration, a part of the Department of Housing and Urban Development. FHA insurance enables lenders to loan a very high percentage of the sale price.

Finance Charges |Back to Top|
The price paid to a lender for the use of borrowed money. Interest is charged as a percentage of your outstanding balance (purchases and charges reduced by payments or credits posted). This percentage, or interest rate, can vary from card to card.

Fixed Rate |Back to Top|
A set annual percentage rate (APR) that does not change in response to interest rate changes and conditions. A Variable Rate periodically goes up or down based on fluctuations in market interest rates as reflected in a published index (e.g., the prime rate published in the Wall Street Journal).

Home Equity Loan |Back to Top|
A fixed- or variable-rate loan, secured by a mortgage lien, that allows a homeowner to borrow against equity in their house to pay for repairs or other home improvements, refinance other debt or use for other purposes.

Interest Rate |Back to Top|
The fee charged by a lender to a borrower for the use of borrowed money, usually expressed as an annual percentage of the principal; the rate is dependent upon the time value of money, the credit risk of the borrower and the inflation rate. Interest rates can be calculated as simple, compounded or effective.

Individual Retirement Account (IRA) |Back to Top|
A retirement savings account for individuals. Deposits may be tax-deductible. These contributions cannot exceed specific amounts without penalties.

    Interest |Back to Top|
    The amount paid for the use of money. Thus, financial institutions pay savings depositors interest for the use of the funds on deposit, and borrowers pay financial institutions interest for the use of the money advanced to them.

Lien |Back to Top|
A legal claim against an asset, like a home or auto, which is used to secure a loan.

Loan-to-Value Ratio |Back to Top|
Also known as LTV. It is the amount borrowed (loan) divided by the appraised value of the collateral. It is expressed as a percentage. The collateral value is determined by either an appraisal or recent arms-length transaction. For example, a $20,000 loan on a car that was recently appraised at $25,000 has an LTV of 80 percent.

Mortgage Insurance (MI) |Back to Top|
Insurance which protects mortgage lenders against loss in the event of default by the borrower. This allows lenders to make loans with lower down payments. Also known as private mortgage insurance or PMI. PITI Acronym for the items included in a monthly mortgage payment: principal, interest, taxes, and insurance.

Overdraft |Back to Top|
When the amount of a paid check or other withdrawal exceeds the available balance in a checking account (can result in fees).

PIN |Back to Top|
Personal Identification Number. Secret code you choose for your card that enables you to access your money or perform banking transactions through the ATM as well as make purchases without signing a sales receipt at merchants that have PIN pads. Your PIN should not be shared with anyone.

PMI |Back to Top|
Private mortage insurance (PMI) protects mortgage lenders against loss in the event of default by the borrower. This allows lenders to make loans with lower down payments.

PITI |Back to Top|
Acronym for the four items included in a monthly mortgage payment: principal, interest, taxes, and insurance. Principal is the loan amount. Interest is the rate at which the finance charge you pay for borrowing is calculated. Taxes are the real estate taxes for which you are responsible, and insurance is the homeowners insurance that your lender requires you to have.

Pre-Qualification |Back to Top|
Evaluation of a potential borrower's financial status to determine the size and type of mortgage available to the borrower.

    Principal |Back to Top|
    The amount borrowed, or the part of the amount borrowed which remains unpaid (excluding interest). Also known as the part of a monthly payment that reduces the outstanding balance of a mortgage.

Term |Back to Top|
The period of time of a loan. Auto loans are generally two to fours years in duration, while home mortgage loans generally have 15- or 30-year terms.

Title |Back to Top|
A legally binding document that establishes evidence of ownership of an asset and any liens or other claims filed against the asset. A title should be examined for any recorded liens, which "encumber" a title and make its transfer more difficult than that of an unencumbered title. An unencumbered title is also referred to as a "clean" title.

Title Insurance |Back to Top|
Insurance against loss resulting from defects of title of public record.

Underwriting |Back to Top|
A loan review process that begins with the acceptance of a loan application and ends with a decision to either approve or deny the loan request.

Variable Rate |Back to Top|
A Variable Rate periodically goes up or down based on fluctuations in market interest rates as reflected in a published index (e.g., the prime rate published in the Wall Street Journal).

Don't see a term listed here? Click here for a more complete compilation of financial terms, provided by "The Free Dictonairy by Farlex".