Pricing Regulation Glossary (mftransparency.org)

Source: https://www.mftransparency.org/glossary-regulation/ (retrieved 21-03-2023)  

Amortize

Paying off a debt in instalment, which includes both principal and interest.

Amount Financed

The net loan amount, calculated by starting with the full amount borrowed (principal) and subtracting out the amount of prepaid finance charges (finance charges the borrower is paying in advance).

Annual Percentage Rate (APR)

The price of a loan expressed in annual terms. It is calculated by discounting the cash flow of the loan, thus comparing the costs of the loan to the amount of inflows the lender receives over time.

Application Fee

A fee charged by the creditor for the loan application.

Borrowers

Person or organizations who receive funds in the form of a loan with the obligation to repay the loan in full.

Central Bank

Banking agency for commercial banks and government. It is responsible for implementing monetary policy in the country and protecting depositors.

Closing Costs

A general term to describe the fees that a borrower will pay at closing the agreement. Sometimes called "settlement Fees".

Commercial Banks

Financial service intermediaries registered, licensed and regulated as a "Bank" by the national regulator. Banks may provide common financial services, including: deposit taking, lending, payment services, and money transfers.

Communication Venue

Credit providers means of advertising, it could be website, media, branch office or other documentary means.

Compound Interest

Interest calculation method where interest is calculated on the principal as well as the interest earned in previous periods. It generates a higher return because of earning "interest on interest".

Compulsory Deposit

A cash collateral required from the client to access a loan. It could be an upfront or ongoing requirement.The client does not have access to the deposit during the loan.The deposit may be held by the lender or by a third party.

Consumer Protection

Consumer protection is a group of laws and organizations designed to ensure the rights of consumers and the free flow of truthful information in the market place.

Consumer credit

A type of credit, the borrower use to finance consumptions items such as buying car, holiday packages, etc.

Cooperative

A form of formal financial organization which is jointly owned and run by its members who share the profits and losses. It may offer a range of financial services, including lending and deposit taking, for the benefit of its members.

Cost of Borrowing

The cost to you, I.e the borrower, to borrow money. It includes interest, fees and any other costs associated with the loan.

Cost of Fund

The cost of borrowing money from a financial instruments market, usually expressed as an interest rate.

Daily Interest Rate

Periodic interest rate expressed in one day.

Declining Balance Method

Interest is computed on principal amount remaining unpaid on a loan, which decreases every time an instalment is paid. Interest is computed on each period declining balance.

Disclosure Requirements

Provisions in a truth-in-lending legislation requiring the credit provider to disclose, in sufficient detail, the terms and conditions of the loan offered. Discounted Cash Flow,A method of expressing the value of future cash flows through discounting them using a weighted average interest rate to the present value of the cash flows.

Document Preparation Fee

A fee charged for preparing the loan documentation.

Early repayments

A full settlement of the credit amount and all other charges before the agreed up on due date.

Effective Interest Rate

The rate arrived at by compounding interest on interest earned on previous interest period.

Fee Charges

The charges that are levied on a borrower for processing a loan transaction. For example, processing fee, administrative fee.. etc

Finance Charge

Is the total cost of borrowing which includes interest, fees, and any other charges and deductions incidental to loan agreement.

Flat Interest Method

A flat interest rate is an interest rate calculated on the basis of the stated initial principal amount of the loan irrespective of the repayment plan.

Insurance Charge

A premium paid by the borrower insuring the future loan repayment. Insurance could cover part or the whole loan amount depending on the repayment plan.

Interest Calculation Method

Interest calculation method is the way the interest rate is computed on the principal loan. It could be effective interest rate or simple interest rate method.

Interest Rate Cap

A policy rate, issued by a regulatory agency,limiting the maximum lending interest rate charged by a financial institution.

Late charge (Penalty)

A penalty charge, levied by the credit provider, for missing an agreed upon loan repayment plan.

Loan Amount

The total amount of a loan specified on the loan agreement provided by the lender to the borrower.

Loan Contract

A loan agreement is a contract between a borrower and a lender which states the mutual promises made by each party.

Loan Term

The total duration of a loan contract usually expressed in number of months or years.

Loans

Amount of money borrowed usually from a financial institutions and expected to be paid back with interest.

Long Term Loan

A duration of a loan contract lasting more than 12 months.

Margin Cap

An interest rate cap imposed on the profit margin earned from interest income by a credit institution.

Monthly Interest Rate

A periodic interest rate expressed in one month, usually 30 or 31 days are used.

Mortgage

A mortgage is a promise in which you agree to put up you home as security for a loan. The mortgage is the instrument which secures the promissory note, in which you promise to repay the loan at a certain date.

Nominal Interest Rate

Is the interest rate as stated, without adjusting to compounding of the periodic interest. The nominal interest rate is arrived at by multiplying the periodic interest rate by the number of periods in the year.

Non-Bank Financial Institutions

An institution that provides similar services to those of a Bank,but is licensed under a separate category e.g. due to lower capital requirements, limitations on financial service offerings, or supervision under a different state agency.

Non-Prudential Regulation

A non-prudential (conduct of business) regulation include areas such as enabling the formation and operation of micro-lending institutions; protecting consumers; preventing fraud and financial crimes; setting up credit information services; supporting secured transactions; policies with respect to interest rates; limitation on foreign ownership, management, and sources of capital; tax and accounting issues; etc.

Ongoing Charge

Fee charged on the loan and paid on an on going basis.

Over Indebtedness

The state of being deeply in debt that the borrower is unable to meet its contractual loan repayment obligation on the agreed time.

Policy Rate

An artificial interest rate limit set usually by the Central Bank (regulator) of the country to restrict the market lending or saving interest rate. A lending policy rate usually is a maximum rate and a saving policy rate is usually a minimum rate.

Present Value

A future amount of money discounted to the present date.

Price Cap

A policy rate limiting the maximum lending interest rate charged by a financial institution.

Price Components

The number of separate pricing components charged by the credit provider as a condition to access a loan.

Price of Loan

The price,expressed as total or ratio of the loan amount, it is the cost to get the loan.

Prudential Regulation

‘Prudential’ (regulation or supervision) – aimed at protecting the financial soundness of licensed intermediaries' business, in order to prevent financial system instability and losses to depositors.

Quarterly Interest Rate

A periodic interest rate expressed as every "90 days".

Refinance

To repay one or more of existing outstanding loans by getting new loan.

Repayment Schedules

a table detailing each periodic repayments on an amortized or flat interest loan.

Right to Withdrawal (rights to cancel)

It is the right of the borrower to withdraw from the credit agreement before the termination date. Usually, a specific withdrawal period, at the beginning of the contract is provided.

Rural Banks

Banking institution registered and regulated as a "rural bank" that provide financial services to clients who live and work in non-urban areas and who are generally involved in agricultural-related activities.

Short Term Loan

A duration of a loan contract usually lasting less than 12 months

Simple Interest Rate

Interest calculation method where interest is calculated on the principal only excluding interest earned on a previous period.

Standard National Formula

A standardized and one interest rate calculation formula provided to credit institution to compute and communicate to borrowers the total cost of credit. The formula could be a compound interest or simple interest.

Taxes on Loan

Includes all taxes paid on net income or other measure of profits as defined by local tax authorities. This item may also include any revenue tax. It excludes taxes related to employment of personnel, financial transactions, fixed-assets purchase or other value-added taxes.

Thrift Banks

It is a savings and mortgage banks, private development banks, and stock savings and loans associations, or any banking corporation that may be organized for the following purposes: collecting deposit from the public and investing them, lending short and long term loans to businesses and providing other diversified financial and allied services in its chosen market.

Total Cost of Credit

Is the total cost of borrowing including interest, fee, insurance, taxes and any other charges incidental to the loan agreement.

Total Repayment

The total repayment due from the client at the end of the loan contract. It includes principal, interest and any other ongoing charges during the life of the credit agreement.

Transfer Tax or Charge

A government tax or charge that is usually based on a percentage of the loan amount and imposed by the local law.

Truth-in-Lending Legislation

A piece of legislation or group of legislations, adopted in the national law to protecting credit borrowers and promoting truth-in-lending in the financial sector.

Underwriting Fees

This is a fee charged by the lender to evaluate whether the borrower qualifies for a mortgage loan.

Upfront Charges

Includes fees and all other costs of a loan charged at the beginning of the loan agreement.