Tag: Lending

Subprime Mortgage definition explanation

What is Subprime Mortgage?
A type of mortgage that is normally made out to borrowers with lower credit ratings. As a result of the borrower’s lowered credit rating, a conventional mortgage is not offered because the lender views the borrower as having a larger-than-average risk of defaulting on the loan. Lending institutions often charge interest on subprime mortgages at a rate that is higher than a conventional mortgage in order to compensate themselves for carrying more risk. Read more for examples and further explanation including related video clips and also comments
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Foreclosure Prevention Act of 2008 definition explanation

What is Foreclosure Prevention Act of 2008?
A housing act that is designed to help families keep homes that are facing foreclosure and stabilize the overall housing market. The American Housing Rescue and Foreclosure Prevention Act of 2008 seeks to achieve this goal through measures such as increased tax credits for low-income households and first time home buyers, and by encouraging the use of housing bonds to finance rental properties and affordable housing projects. Read more for examples and further explanation including related video clips and also comments
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Parallel Loan definition explanation

What is Parallel Loan?
A type of foreign exchange loan agreement that was a precursor to currency swaps. A parallel loan involves two parent companies taking loans from their respective national financial institutions and then lending the resulting funds to the other company’s subsidiary. Read more for examples and further explanation including related video clips and also comments
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Excess Reserves definition explanation

What is Excess Reserves?
Capital reserves held by a bank or financial institution in excess of what is required by regulators, creditors or internal controls. For commercial banks, excess reserves are measured against standard reserve requirement amounts set by central banking authorities. These required reserve ratios set the minimum liquid deposits (such as cash) that must be in reserve at a bank; more is considered excess. Read more for examples and further explanation including related video clips and also comments
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Interest Rate definition explanation

What is Interest Rate?
The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets. Interest rates are typically noted on an annual basis, known as the annual percentage rate (APR). The assets borrowed could include, cash, consumer goods, large assets, such as a vehicle or building. Interest is essentially a rental, or leasing charge to the borrower, for the asset’s use. In the case of a large asset, like a vehicle or building, the interest rate is sometimes known as the “lease rate”. Read more for examples and further explanation including related video clips and also comments
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Subprime Credit Card definition explanation

What is Subprime Credit Card?
A type of credit card issued to people with substandard credit scores or limited credit histories. These cards will typically carry much higher interest rates than credit cards granted to prime borrowers; they also come with extra fees and lower credit limits.

Subprime credit cards are issued by both major issuers and smaller financial institutions that focus only on subprime lending. Read more for examples and further explanation including related video clips and also comments
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No-Ratio Mortgage definition explanation

What is No-Ratio Mortgage?
A mortgage program in which a borrower’s income isn’t used or reported in qualifying the borrower for the mortgage under the standard debt-to-income ratio requirements. The loan is usually made based on the borrower’s down payment, credit score or assets. Read more for examples and further explanation including related video clips and also comments
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Finance Charge definition explanation

What is Finance Charge?
A fee charged for the use of credit or the extension of existing credit. May be a flat fee or a percentage of borrowings, with percentage-based finance charges being the most common.

A finance charge is often an aggregated cost, including the cost of the carrying the debt itself along with any related transaction fees, account maintenance fees or late fees charged by the lender. Read more for examples and further explanation including related video clips and also comments
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