For your convenience, we have included the definitions to some of the most common, and often confusing, financial terms.


Annual percentage rate (APR) - The annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly costs of funds over the term of a loan. The APR includes any fees or additional costs associated with the transaction

Appreciation - An increase in the value or price.

Asset - Anything an individual or business owns that has commercial or exchange value

Balance - The amount owed on a loan or credit card or the amount in a savings or investment account.

Balance Sheet - A financial statement showing assets, liabilities and net worth of an individual or organization on a given date.

Budget - An itemized summary of probable income and expenses for a given period.

Capital - Cash or other resources accumulated and avaialble for use in producing wealth.

Collateral Assets - Pledged to secure a loan.

Credit - The granting of money or something else of value in exchange for a promise of future repayment.

Credit report - A loan and bill payment history, kept by a credit reporting company and used by financial institutions and other potential creditors to determine the likelihood a future debt will be repaid.

Credit score - A number generated y a statistical model that objectively predicts the likelihood that a debt will be repaid on time.

Creditor - A person, financial institution or other business that lends money.

Debit - Charges to an account.

Debt - Money owed; also known as a liability.

Direct deposit - The electronic transfer of a payment from a company to an individual's checking or savings account. Many employers offer direct deposit of paychecks.

Equity - Ownership interest in an asset after liabilities are deducted.

Interest - A fee for the use of money over time. It is an expense to theborrower and revenue to the lender.

Interest rate - The percentage charged for a loan, usually a percentage of the amount lent. Also, the percentage paid on a savings account.

Investment - Anything one acquires for future income or beenfit.

Liability - Money an individual or organization owes; same as debt.

Lien - A creditor's claim against a property, which may entitle the creditor to seize the property if a debt is not repaid.

Loan - A sum of money lent at interest.

Maturity - The time when a note, bond, or other investment option comes due for payment to investors.

Mortgage - A temporary and conditional pledge of property to a creditor as security for the repayment of a debt.

Net worth - The difference between the total assets and total liabilities of an individual.

Principal - The unpaid balance on a loan, not including interest; the amount of money invested.

Risk - The possibility of loss on an investment.





Source: Federal Reserve Bank of Dallas |