Personal Loan Glossary: Loan Words in Plain English

A

Adverse action notice: A written notice a lender must send when it turns down your application, or approves less than you asked for and you do not accept the smaller offer. It gives the main reasons, or tells you how to ask for them, and names the credit bureau if a report was used. See what to do if you are denied. More: Loan counteroffers
Amortization: Paying off a loan with equal payments on a schedule, where each payment covers that month's interest first and the rest reduces the balance. Early payments are mostly interest; later ones are mostly principal. More: 36-month personal loans
Amortization schedule: A table that shows, for each payment, how much goes to interest, how much to principal and what balance is left. Read year by year, it shows how much of the interest you pay in the first ring of a long loan. Try the loan term comparison. More: 60-month personal loans
Amount financed: The credit you actually receive, as shown on the Truth in Lending disclosure. When a fee is taken out of the loan, the amount financed is smaller than the loan amount you sign for. More: Covering fees in the loan amount
Annual percentage rate (APR): The yearly cost of a loan, including interest and certain fees, expressed as a rate. Two loans of the same size and term can be compared on APR; a loan with a fee has an APR higher than its interest rate. More: $10,000 personal loans
Application fee: A charge for processing a loan request. Most personal loans do not have one; federal credit union payday alternative loans may charge one of no more than $20.
Autopay discount: A rate reduction some lenders give if you let them take each payment automatically from your bank account. The discount usually ends if you turn autopay off, so check the APR with and without it.

B

Balance: What you still owe on the loan, not counting future interest. The balance falls with each payment; it is the starting point if you refinance or ask to borrow more. More: Borrowing more on an existing loan
Bank prime rate: The base rate many banks use to price loans, published by the Federal Reserve. It was 7.00% on November 9, 2026. It mainly moves variable-rate credit; fixed-rate personal loans price off it only indirectly.

C

Co-borrower: A second applicant who signs the loan, shares the money and owes the full debt. A lender can count both incomes, which can support a larger amount. See cosigners and co-borrowers. More: $50,000 personal loans
Cosigner: A person who promises to repay if you do not, without getting any of the money. A cosigner with strong credit or income may help you qualify for a larger amount or a lower rate, but the debt shows on their credit too. More: $35,000 personal loans
Counteroffer: An offer of credit on different terms than you asked for, such as a smaller amount, a shorter or longer term, or a higher rate. Under Regulation B, if you do not accept or use it, the lender must send an adverse action notice within 90 days. More: Loan counteroffers
Credit score: A number built from your credit reports that lenders use to judge the risk of lending to you. It affects both the rate and the largest amount a lender will offer. See credit scores explained. More: Credit score and loan amount
Credit union: A member-owned financial institution. Federal credit unions face a federal interest rate ceiling of 15% by statute, which the NCUA Board has temporarily raised to 18% through September 10, 2027. More: $3,000 personal loans

D

Debt consolidation loan: A personal loan used to pay off several other debts, often credit cards, leaving one fixed payment. The amount is set by the balances you pay off plus any fee. See debt consolidation loans. More: $20,000 personal loans
Debt-to-income ratio (DTI): Your monthly debt payments, including the new loan, divided by your gross monthly income. Lenders set their own limits; Lendarbor examples use 36% as a reference point. Check yours with the how much can I borrow calculator. More: Debt-to-income and loan size
Disbursement: The moment the lender sends the loan money, to you or directly to creditors you are paying off. The amount disbursed is the net proceeds, after any fee taken out of the loan.

E

Equal Credit Opportunity Act (ECOA): The federal law that bars lenders from discriminating against applicants on grounds such as race, sex, marital status or age, and that gives you the right to know why credit was denied. Regulation B carries it out. More: Loan counteroffers

F

Federal funds rate: The overnight rate banks charge each other, steered by the Federal Reserve's target range. The range was 3.75% to 4.00% after the October 28, 2026 meeting. It feeds into loan pricing over time, not one for one.
Finance charge: The dollar cost of credit on the Truth in Lending disclosure: all interest plus fees such as an origination fee. On the same amount, a longer term almost always means a larger finance charge. More: 72- and 84-month personal loans
Fixed rate: A rate that stays the same for the whole loan. Most personal loans have a fixed rate and equal monthly payments, which is what Lendarbor's worked examples assume. More: 48-month personal loans

G

Gross income: Income before taxes and deductions. Lenders usually measure debt-to-income against gross income, so the ratio looks lower than the share of take-home pay the payment will use. More: Income for a personal loan
Gross-up: Raising the loan amount so that, after a fee is deducted, you still receive the cash you need. The amount equals the cash needed divided by one minus the fee rate: $5,000 with a 6% fee needs about $5,319. Use the amount to request calculator. More: Covering fees in the loan amount

H

Hard inquiry: A credit check made when you formally apply for credit. It appears on your report and can lower your score a little for a while. See hard vs. soft inquiries. More: Credit score and loan amount
Home equity line of credit (HELOC): A revolving line secured by your home, usually with a variable rate. It can reach larger sums than an unsecured personal loan, but your home is collateral. See personal loan vs. HELOC. More: $100,000 personal loans
Home equity loan: A fixed-rate installment loan secured by your home. It is one of the common alternatives when an unsecured personal loan cannot reach the amount you need. More: $100,000 personal loans

I

Interest: The price of borrowing, charged as a percentage of the balance. On an amortizing loan each month's interest equals the balance times the monthly rate, so interest shrinks as the balance falls.

L

Late fee: A charge for a payment received after the due date or grace period. The amount and any cap depend on the loan agreement and state law. See if you miss a payment.
Loan amount: The principal you sign for. It can be larger than the cash you receive when a fee is taken out, so size it from the cash you need, plus the fee, and no more. More: How much to borrow
Loan term: How long you have to repay, usually stated in months. A longer term lowers the payment and raises the total interest; a $10,000 loan at 15% APR costs about $2,480 in interest over 36 months and about $4,274 over 60 (worked example). More: Choosing a term for your amount

M

Maximum loan amount: The largest sum a lender offers on a product. The amount you are offered can be lower, based on your income, debts and credit. More: Minimum and maximum loan amounts
Military annual percentage rate (MAPR): The cost measure used by the Military Lending Act. It includes interest and many fees and add-on charges that a regular APR can leave out, and it is capped at 36%. More: Loan amount and the law
Military Lending Act (MLA): A federal law that caps the MAPR at 36% on most consumer credit to active-duty servicemembers and their dependents. It does not cover credit that is exempt from Regulation Z, such as an unsecured loan above $73,400 in 2026, or credit secured by a dwelling (32 CFR 232.3(f)(2)). See loans for military members and veterans. More: Loan amount and the law
Minimum loan amount: The smallest sum a lender will lend. Some lenders do not make very small loans, and some only offer their longest terms on larger amounts. More: Minimum and maximum loan amounts
Monthly payment: The fixed amount due each month. It depends on the amount, the APR and the term: $10,000 at 15% APR is about $347 a month over 36 months (worked example). See payment by loan size. More: $5,000 personal loans

N

Net proceeds: The money that actually reaches you or your creditors after any fee deducted from the loan. See net loan proceeds. More: Covering fees in the loan amount

O

Origination fee: A one-time charge for making the loan, often a percentage of the amount, usually taken out before you get the money. It counts in the APR. See origination fees. More: Covering fees in the loan amount

P

Payday alternative loan (PAL): A small loan from a federal credit union under NCUA rules. PAL I loans run $200 to $1,000 for one to six months; PAL II loans go up to $2,000 for one to twelve months. The rate can be up to 10 points above the NCUA ceiling, and the application fee is capped at $20. More: $1,000 personal loans
Payment schedule: The number, amounts and due dates of your payments, shown on the Truth in Lending disclosure. A 12-month loan has 12 payments; an 84-month loan has 84. More: 12-month personal loans
Personal loan: An installment loan you can use for most purposes, usually unsecured and with a fixed rate. See personal loans for how the product works. More: How much to borrow
Prepayment penalty: A fee for paying the loan off early. Many personal loans do not have one, but check the disclosure. See prepayment penalties. More: 60-month personal loans
Prequalification: An early estimate of the amount, rate and term a lender might offer, usually based on a soft credit check. It is not an approval; the final offer can differ. See prequalification explained.
Principal: The amount borrowed, or the part of it still owed. Each payment's principal share is what is left after that month's interest. More: $10,000 personal loans

R

Rate cap: A legal maximum on the interest or APR a lender may charge. Many states set caps that depend on the loan amount, so a cap can change at a size threshold. See installment loan rate caps by state. More: Loan amount and the law
Refinance: Replacing a loan with a new one, usually to change the rate, the payment or the term. A longer new term can lower the payment and still raise the total cost. See refinancing a personal loan. More: Borrowing more on an existing loan
Regulation B: The rule that carries out the Equal Credit Opportunity Act (12 CFR part 1002). It sets when lenders must notify you of a decision, including the 30-day and 90-day timing for denials and counteroffers. More: Loan counteroffers
Regulation Z: The rule that carries out the Truth in Lending Act (12 CFR part 1026). It requires the APR, finance charge and total of payments to be disclosed. Credit above an annually adjusted threshold ($73,400 in 2026) is exempt unless it is secured by real property or a principal dwelling, or is a private education loan. More: Loan amount and the law

S

Second personal loan: A new loan taken while you still owe on another. The added payment raises your debt-to-income ratio, and some lenders limit how many loans one borrower can have with them. More: A second personal loan
Secured loan: A loan backed by collateral, such as a car, savings or a home. Collateral can support a larger amount or lower rate, but you can lose it if you do not repay. See secured vs. unsecured loans. More: $25,000 personal loans
Simple interest: Interest charged only on the balance you still owe, not on past interest. Most personal loans charge simple interest, so paying early or extra reduces the interest you pay. More: 36-month personal loans
Small-loan act: A state law that licenses lenders making smaller consumer loans and caps their rates, often with different limits by loan size. California, for example, caps loans of $2,500 to under $10,000 from state finance lenders at 36% a year plus the federal funds rate. More: $2,000 personal loans
Soft inquiry: A credit check that does not affect your score, used for prequalification and account reviews. Only you see it on your report. More: Credit score and loan amount

T

Top-up loan: Extra money added to an existing loan, usually by paying off the old balance with a new, larger loan. The new loan often restarts the term, so check the total cost, not just the new payment. More: Borrowing more on an existing loan
Total of payments: Everything you will have paid by the end of the loan if you pay on schedule, shown on the Truth in Lending disclosure. See the total cost of a loan. More: 72- and 84-month personal loans
Truth in Lending disclosure: The form that shows the APR, finance charge, amount financed, total of payments and payment schedule before you sign. See reading the disclosure.

U

Underwriting: The lender's review of your application: income, debts, credit history and sometimes bank statements. The result sets whether you are approved, for how much, at what rate and for which terms. More: Income for a personal loan
Unsecured loan: A loan with no collateral, approved on your credit and income. Most personal loans are unsecured, which tends to limit the amount and raise the rate compared with secured credit. More: $15,000 personal loans
Usury: Charging interest above the legal limit. Usury laws are set by states and have many exceptions, so the cap that applies depends on the lender type and the loan size. More: Loan amount and the law

V

Variable rate: A rate that can change with a benchmark such as the prime rate. Few personal loans use one, but HELOCs and some lines of credit do, so the payment can rise.

W

Worked example: A figure Lendarbor computes with the standard amortization formula, assuming a fixed rate, equal monthly payments and no fees unless stated. It is not a quote or an offer. See the methodology.