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Glossary of Terms

Words that are commonly used at Blackhawk Community Credit Union are not always common to the consumer. Many of us have never used these terms before. Here are some definitions in “common speak”. If you still have questions, please just ask. We are happy to help.

Abandoned Property List

This is a list of members with dormant accounts (no activity) for three or more years. If the funds in these accounts remain unclaimed, Abandoned Property laws allow the State to claim the funds. The Credit Union is obligated to turn over all the unclaimed funds held in these accounts. If your name is on the Abandoned Property list, contact the Credit Union immediately.

Automated Clearing House (ACH)

Electronic transaction to/from any of your accounts. Sometimes is can be called an automated payment or automatic deposit from/to your account.

Adjustable Mortgage Loans (ARM)

A mortgage loan which allows the lender to adjust the interest rate periodically according to loan terms. Typically the loan starts out with a fixed rate for a period of time and then “adjusts” with a specified index.

Annual Percentage Rate (APR)

Sometimes also called the interest rate. The yearly interest rate or % that is paid on an outstanding balance in the form of interest.

Amortization

The process of fully paying off a loan by payments of principal and interest over a definite time.

Amortization Schedule

The schedule of payments for paying off a loan. Typically, it is a listing of each payment due, the estimated amount of principal and interest with each payment, and the anticipated balance.

Appraisal

A professional opinion of an asset’s market value as of a specific date. Most often used to determine the value of real estate property.

Collateral

Also referred to as security, collateral (often personal property like a car or a home) that is offered to secure a loan. This may be done to obtain a better interest rate on a loan or needed to qualify for the amount requested. If collateral is added, it becomes subject to seizure if the loan is not paid as agreed.

Compound Interest

Interest, which is calculated not only on the initial principal, but also the accumulated interest of prior periods. In simple terms it is called “getting interest on your interest.” It just means that when you earn interest, you do not withdraw those funds. The next time interest is paid you are paid on the entire balance, including the interest you earned on prior periods. This method is typically used to calculate dividends on savings accounts.

Cosigner

Another person who signs for a loan and guarantees that payments will be made if the original borrower does not pay. It is important to understand that the cosigner assumes equal liability for the loan and payment history on the cosigned loan is reported to the credit bureau on all borrowers.

Credit

The promise to pay in the future in order to obtain funds in the present. Examples are loans or credit cards.

Credit Card Balance Transfer

The process of moving an unpaid credit card balance from one issuer to another. For example, transferring your credit card balance from X bank to BHCCU for a lower rate.

Credit Union

A financial cooperative organization of individuals with a common affiliation (such as employment, labor union membership, or place of residence) that pool their resources to benefit all members.

Credit History

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.

Custodial Account

Account managed by a parent or legal guardian for the benefit of a minor.

Default

Failure to meet the terms of a credit agreement. Most often, it means the borrower did not pay as agreed, but it could be failure to meet any terms of the agreement.

Discount Points

Amount payable to the lending institution by the borrower or seller to lower the interest rate. Typically available on mortgage loans.

Dividends

A share of earnings distributed to shareholders of a credit union. Often call interest.

Dormant Account

Any share account which does not have a deliverable address, has a share balance less than $25 and has no member transaction activity for a period of 3 years.

Equity

In real estate, the difference between fair market value and current indebtedness; also referred to as the owner’s interest. Note that 100% of the equity in the home is not always available to borrow against. Most financials have set limits to protect against declining values.

Finance Charge

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 loan to loan.

Fixed Rate

A set annual percentage rate (APR) that does not change in response to interest rate changes and conditions in the market.

Home Equity Loan

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.

Inactive Account

Any share account which does not have a deliverable address and has not had member transactions activity for a period of 5 years. Inactive account are considered Abandoned Property (see Abandoned Property for more details).

Interest Rate

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)

A retirement savings account for individuals that follows federal tax rules. Deposits may be tax-deductible. These contributions cannot exceed specific amounts without penalties.

Interest

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

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

Loan-to-Value Ratio

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 valuation. 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)

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

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

PIN

Personal Identification Number. Secret code for your debit or credit 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

See Mortgage Insurance.

Pre-Qualification

Evaluation of a potential borrower’s financial status to determine the amount and type of mortgage available to the borrower.

Principal

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.

Share Certificate

The dividend-bearing savings account has a fixed term and interest rate. It is intended that the money in the account be held until maturity, at which time it may be withdrawn together with the accrued dividends. A penalty will be imposed if funds are withdrawn prior to the maturity date.

Term

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

Title

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

Insurance against loss resulting from defects of title on real property of public record.

Variable Rate

A rate that 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).