Cost & terms glossary
The words on a loan agreement do the real work. Here's what they mean in plain English, entered like specimens in a field notebook.
APR (Annual Percentage Rate)
The cost of a loan expressed as a yearly rate, including fees and interest. It's the single best number for comparing very different loan types side by side — a $15 flat fee on a 2-week loan and a 400% APR describe the same cost, but only one of them makes the size obvious.
Finance Charge
The total dollar cost of borrowing — every fee and interest charge combined — on top of the amount you originally borrowed. Ask for this number in dollars, not just as a percentage.
Rollover / Renewal
Extending a loan past its due date by paying a new fee instead of paying it off. The fee clock resets, and repeated rollovers are how a small loan turns into a much larger total cost.
Origination Fee
An upfront charge, often 1–10% of the loan amount, deducted before you receive the money. If you borrow $1,000 with a 5% origination fee, you may only receive $950 — but you'll owe the full $1,000 plus interest.
Collateral
Something of value — a car title, for example — pledged to secure a loan. If you don't repay, the lender can claim it. Secured loans (with collateral) often carry lower rates than unsecured ones, but the downside risk is different in kind, not just degree.
Principal
The original amount borrowed, before any fees or interest are added. Every payment you make is split between reducing the principal and covering the finance charge.
Balloon Payment
A single large payment due at the end of a loan term, often much bigger than the regular payments before it. Common in some title and installment loans — always confirm whether one is scheduled before you sign.