Grace Loan Advance Glossary: Personal Loan Terms, A to Z

Terms from A to C explain how a loan's cost is measured and how lenders read your credit. APR, amortization, collateral, co-signers, credit reports and credit scores show up in nearly every personal loan offer you will see.

Whether you searched Grace Loan Advance or graceloanadvance, the same few terms decide what a loan costs: APR, term and total of payments. Start with those, then use our personal loan FAQ for longer answers.

Amortization

Amortization is the schedule that splits each fixed payment between interest and principal until the balance reaches zero. Early payments are mostly interest, and later ones are mostly principal. On $2,000 at 24.99% APR over 12 months, about $41.65 of the first $190.08 payment is interest.

Annual income

Annual income is what you earn in a year before taxes, from all regular sources. Lenders weigh it against your debts to judge whether you can afford a new payment. Report it accurately, because lenders may check it against pay stubs, bank statements or tax forms.

APR (Annual Percentage Rate)

APR is the yearly cost of a loan shown as a percentage, including interest and certain required fees such as an origination fee. Lenders must show it before you sign, which makes it the best single number for comparing offers. Typical APRs run roughly 6% to 36%, set by each lender; see the ranges on our personal loan rates page.

Autopay (automatic payment)

Autopay lets the lender pull your monthly payment from your bank account on the due date. It lowers the chance of a missed payment, and some lenders take a small amount off the APR for using it. Keep enough money in the account to avoid overdraft fees.

Balance transfer

A balance transfer moves debt from one credit card to another, often to use a low introductory rate. Most cards charge a transfer fee, and the low rate ends after a set period. It is a common alternative to a debt consolidation loan.

Collateral

Collateral is property a borrower pledges to secure a loan, such as a car or a savings account. If the loan is not repaid, the lender can take the collateral. Most loans of $500 to $5,000 are unsecured and need none.

Co-signer

A co-signer is a second person who signs the loan and promises to repay it if the main borrower does not. A co-signer with stronger credit or income can help an applicant qualify or get a lower APR. The debt also appears on the co-signer's credit report, so missed payments hurt both people.

Connector (loan-request service)

A connector takes one loan request and passes it to lenders in a network instead of lending money itself. The lender, not the connector, makes the credit decision, sets the terms and funds the loan. Many searches for grace advance loans lead to connectors, so check which kind of service you are using; ours is a free connector.

Credit bureau

A credit bureau is a company that collects information about how people use and repay credit. The three national bureaus are Equifax, Experian and TransUnion. Lenders report payments to them and pull credit reports from them.

Credit report

A credit report is a record of your credit accounts, balances, payment history, inquiries and certain public records. Lenders read it to judge how you have handled debt. You can request free copies from each national bureau and dispute any errors you find.

Credit score

A credit score is a three-digit number, usually from 300 to 850, that sums up the information in your credit report. Higher scores generally bring lower APRs and more offers. Payment history and the amounts you owe weigh most heavily in common scoring models.

Credit utilization

Credit utilization is the share of your available revolving credit that you are using. A $900 balance on a card with a $3,000 limit is 30% utilization. Lower utilization tends to help your score, which is one reason people use an installment loan to pay down card balances.

The D–F terms describe how your existing debt is measured, what lenders must disclose and how a fixed rate keeps a payment steady. Debt-to-income ratio and the finance charge matter most when you compare offers.

Debt consolidation

Debt consolidation means combining several high-interest balances into one new loan with a single fixed payment. It saves money only if the new APR and fees are lower than what you pay now. It also only works if the old balances are not run back up.

Debt-to-income ratio (DTI)

Debt-to-income ratio is your total monthly debt payments divided by your gross monthly income, shown as a percentage. Someone paying $600 a month on debts with $3,000 of monthly income has a DTI of 20%. Lenders use DTI to judge whether a new payment fits, and each sets its own limit.

Default

Default happens when a borrower fails to repay a loan as agreed, usually after several missed payments. The lender may send the account to collections, report it to the credit bureaus or take legal action. A default can stay on a credit report for about seven years.

Direct deposit

Direct deposit is an electronic transfer of money straight into your bank account. Most lenders send loan funds this way. The timing depends on the lender's process and on when your bank posts the transfer.

Disclosure (loan disclosure)

A loan disclosure lists an offer's key terms before you sign, including the APR, finance charge, amount financed, total of payments and payment schedule. Federal law requires lenders to provide it. Read it in full, because it is the most reliable summary of what the loan will cost.

Due date

The due date is the day each monthly payment must reach the lender. Paying after it may trigger a late fee, and a payment 30 or more days late can be reported to the credit bureaus. Some lenders let you choose or change your due date.

Finance charge

The finance charge is the total dollar cost of credit, including interest and certain fees. For $2,000 over 12 months at 24.99% APR, the finance charge is about $280.94 in this estimate. It appears on the loan disclosure next to the APR.

Fixed rate

A fixed rate is an interest rate that stays the same for the life of the loan. Most personal loans have fixed rates, so the monthly payment never changes. For example, $2,000 over 12 months at 24.99% APR is an estimated $190.08 every month.

Funding

Funding is the moment a lender sends the loan money after you sign the agreement. Funding time depends on the lender, the time of day you sign and your bank. A connector service does not fund loans; the lender does.

The G–L terms explain how lenders check your credit, how installment loans are repaid and how interest is charged. Knowing the difference between a hard and a soft inquiry helps protect your score while you shop.

Grace period

A grace period is a short window after a due date during which a lender accepts payment without a late fee. Not every loan has one, and the length varies by lender and state. Check your agreement rather than counting on it.

Gross income

Gross income is your pay before taxes and deductions. Most lenders ask for it on a request and use it to figure your debt-to-income ratio. Net income, your take-home pay, is the better number for your own budget.

Hard inquiry

A hard inquiry is a full credit check a lender runs when you formally apply for credit. It shows on your credit report and can lower your score by a few points for a while. Several hard inquiries in a short time can add up, so apply only for offers you are likely to take.

Hardship plan

A hardship plan is a temporary arrangement a lender may offer when you cannot make your regular payment, such as a lower payment, a skipped month or a new due date. Interest may keep adding up during the plan. Ask before you miss a payment, not after.

Identity verification

Identity verification is the step where a lender confirms you are who you say you are, usually with your Social Security number, date of birth and address. Some lenders also ask for a photo ID. The check helps prevent fraud and is a standard part of lending.

Installment loan

An installment loan is borrowed as one lump sum and repaid in a set number of equal, scheduled payments. Personal loans and auto loans are both installment loans. Unlike a credit card, the balance does not refill as you pay it down.

Interest

Interest is the price of borrowing money, charged as a percentage of the balance you owe. On a personal loan, interest is figured each month on the remaining principal, so it shrinks as you pay the loan down. In the site-wide example, interest totals about $280.94 on $2,000 over 12 months.

Interest rate

The interest rate is the yearly percentage a lender charges on the principal, not counting fees. It can be lower than the APR when the loan includes an origination fee. Compare APRs, not interest rates, when you weigh two offers.

Late fee

A late fee is a charge a lender adds when a payment arrives after the due date or grace period. It may be a flat dollar amount or a percentage of the payment, set by the lender within state limits. The fee schedule is listed in your loan agreement.

Lender

A lender is the company that reviews your application, makes the credit decision, sets the rate and terms, and sends the money. Your loan agreement and all repayments are with the lender. Check that a lender is licensed in your state before you sign.

Loan agreement

The loan agreement is the contract between you and the lender. It states the amount, APR, payment schedule, fees, what happens if you pay late and your rights. You are bound by it once you sign, so read it before accepting.

The M–P terms cover what you pay each month, what you actually borrow and how you can preview offers. Origination fees, prepayment penalties and prequalification all change what an offer really costs or how you shop.

Monthly payment

The monthly payment is the fixed amount due each month on an installment loan, covering interest and principal. It depends on the amount, APR and term. At 24.99% APR, estimated payments on $1,000 run from $347.31 over 3 months to $39.75 over 36 months; try other numbers in the loan payment calculator.

Net income

Net income is your take-home pay after taxes and deductions. It is the money that actually covers bills, so build your loan budget around it rather than gross income. A payment that looks fine against gross income can feel tight against net.

Origination fee

An origination fee is a one-time charge some lenders take for processing a loan, usually a percentage of the amount. It is often subtracted from the funds you receive, so you get less than you borrowed but repay the full amount. The fee is included in the APR.

Payment history

Payment history is the record of whether you paid past credit accounts on time. It is the largest factor in common credit scoring models. A single payment 30 days late can lower a score, while a long run of on-time payments helps.

Prepayment penalty

A prepayment penalty is a fee some lenders charge if you pay off a loan early. Many personal loans have none, which means paying ahead cuts your interest cost. Look for this term in the agreement before you sign.

Prequalification

Prequalification is an early look at whether a lender might approve you and on roughly what terms, usually based on a soft inquiry. It does not affect your credit score and is not a final offer. The lender confirms your details and may run a hard inquiry before approval.

Principal

Principal is the amount you borrow, not counting interest or fees. Each payment reduces it a little more than the one before. On a $2,000 loan the principal is $2,000, even if you repay about $2,280.94 in total.

Proof of income

Proof of income is a document that shows what you earn, such as a pay stub, bank statement, benefit letter or tax return. Lenders may ask for it before funding. People checking Grace Loan Advance requirements often ask about this item, and the full list is on our eligibility requirements page.

The Q–S terms explain whether a loan needs collateral, how a soft inquiry differs from a hard one and how states shape what lenders can offer. Secured and unsecured loans differ most in the risk to your property.

Repayment schedule

A repayment schedule lists every payment date and amount for the life of the loan, often with the interest and principal in each one. Lenders include it with the disclosure. Matching due dates to the days you get paid makes payments easier to keep.

Revolving credit

Revolving credit is a credit line you can borrow, repay and borrow again up to a limit, such as a credit card. Payments vary with the balance. A personal loan is different, because it is a fixed sum with a fixed payoff date.

Secured loan

A secured loan is backed by collateral, such as a car, a savings account or a certificate of deposit. Because the lender can take the collateral if you do not repay, secured loans may carry lower APRs. The trade-off is the risk of losing that property.

Simple interest

Simple interest is charged only on the principal you still owe, not on past interest. Most personal loans use it. Paying early or paying extra lowers the balance sooner, which cuts the total interest.

Soft inquiry

A soft inquiry is a credit check that does not affect your credit score. Lenders use it for prequalification, and checking your own credit also creates one. Only you can see soft inquiries on your report.

State licensing

State licensing means a lender holds the license a state requires to make consumer loans there. States set rules on rates, fees and amounts, so offers vary by where you live. For the same reason, our service is not available in every state.

The T–Z terms describe how long you repay, how much you pay in total and how lenders reach a decision. The term and the total of payments, read together, show the real cost of any loan offer.

Term (loan term)

The term is the length of time you have to repay a loan, usually stated in months. Loans of $500 to $5,000 commonly run 3 to 36 months. A longer term lowers the payment but raises total interest: $2,000 at 24.99% APR is an estimated $190.08 a month over 12 months or $79.51 a month over 36 months.

Total of payments

The total of payments is the full amount you will have paid when the loan ends, principal plus interest. Lenders list it on the disclosure. For $2,000 over 12 months at 24.99% APR, it is about $2,280.94 in this estimate.

Truth in Lending Act (TILA)

The Truth in Lending Act is a federal law that requires lenders to disclose a loan's APR, finance charge and other key terms in a standard way before you commit. It makes offers from different lenders easier to compare side by side.

Underwriting

Underwriting is the process a lender uses to decide whether to approve a loan and on what terms. It weighs credit history, income, debts and the loan details. Each lender underwrites differently, which is why offers for the same person vary.

Unsecured loan

An unsecured loan has no collateral behind it, so the lender relies 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

A variable rate can rise or fall over the life of a loan as a benchmark rate changes. Credit cards usually have variable rates. Most personal loans use a fixed rate instead, so the payment stays the same.