Banking dictionary – NEW CREDIT

Document analysis – The action by which the banking or non-banking institution to which the future debtor applies for a loan evaluates the credit files. The evaluation of the documents involves the analysis of risk factors and the ability of the future borrower to repay his loan according to the credit agreement.
Advance or own contribution – The amount of money that the debtor covers from its own sources to complete the borrowed amount, in order to fulfill the purpose for which the loan is contracted.
Capitalization – Represents accumulation by addition. The capitalization of interest represents the automatic addition of interest to the maturity of a money deposit.
Credit card – This type of card is funded by a banking and / or non-bank institution, and the cardholder has the obligation to return the money according to the credit agreement concluded between the bank or NFI and the debtor.
Debit card – This type of card is funded by the cardholder or his employer. An example of a debit card is the salary card itself.
Embossed card – Embossed cards have embossed identification elements through which the cardholder can make payments anywhere. Example: manual invoicing, ATM, POS and online payments (on the Internet).
Indented card – These types of cards do not have embossed identification elements and can only be used for the electronic environment.
Collateral cash or collateral deposit – The amount of money that the debtor or guarantor offers as collateral for contracting a bank and / or non-bank loan. This money remains blocked for the entire contractual period of the loan obtained. The money deposit returns to the holder only after the loan has been paid. If the debtor interrupts the repayment of the loan, the banking or non-banking institution takes possession of the deposit offered as collateral.
Credit application – A written request from a individual or legal person to a banking or non-banking institution for a loan.
Assignment – Document by which the debtor offers as collateral to a bank certain debt rights. If the debtor interrupts the repayment of the loan, the banking institution takes possession of the debt rights assigned by him upon signing the loan agreement.
Claim – The creditor’s right to take something from the debtor or to claim something from him.
Commission – Amount of money paid by the debtor to the bank or non-bank financial institution for services related to a bank loan.
Current account – The account where the bank transfers the loan amount and also the account where the bank deducts each month the installment related to the loan obtained by the debtor. This account must be replenished monthly by the debtor in order for the installments to be paid on time, according to the terms of the credit agreement.
Lending contract – The agreement between the banking or non-banking institution and the debtor, by which the bank undertakes to offer a certain amount of money, and the debtor undertakes to pay it according to the agreement between the two. The credit agreement contains all the necessary details – the amount of money, the deadline, the interest, the rights and obligations of each party, the guarantees provided and so on.
Contractor – The individual or legal person who concludes a contract. The contractor is the debtor who obtains a loan and undertakes to pay it according to the contractual period.
Credit – The amount of money a creditor gives to a individual or legal person in exchange for interest.
Bank loan – The amount of money that a banking and / or non-bank institution offers to a individual or legal person in exchange for an interest. The bank loan is offered in terms of precise, carefully established conditions.
Construction loan – The amount of money that a banking institution offers to a individual or legal person, through which the debtor can build his desired property.
Consumer credit – Credit through which the debtor can purchase goods to be used for a long period of time. Example: furniture, appliances, gadgets, cars, etc.
Personal loan – Credit by which the debtor does not have to justify how he will use the money. This type of loan aims to finance all personal needs. Example: renovations, travel, legal or medical issues, studies and so on.
Real estate loan – A loan through which the debtor obtains a large amount of money and which he will have to pay in a shorter or longer period of time, according to the conditions imposed by the lending banking institution. This type of credit can be used to purchase a home, to build a building, to modernize or expand a home, to purchase land, or to refinance other real estate or mortgage loans.
Creditor – Banking institution or NFI that offers loans.
Mortgage Loan – A loan that the borrower obtains to purchase a property, build or renovate. The debtor will guarantee the loan with the real estate that is the object of financing. Land can also be purchased with a mortgage.
Eligibility criteria – The conditions that the future debtor must meet in order to obtain the loan from the institution to be financed.
Debtor – An individual or legal person who has taken out a loan from a banking or non-bank institution.
Interest – The amount of money that the debtor undertakes to pay to the creditor in exchange for the credit obtained from him.
Annual effective interest (APR) – The total cost of the loan expressed as an annual percentage of the total amount of the loan, equal, for a period of one year, to the total value of all commitments. This includes the costs of opening and maintaining a particular account, the costs of using a means of payment for both transactions and withdrawals from that account, and other costs related to payment transactions, whenever it is mandatory to open or maintain an account, for obtaining the credit or for obtaining it in accordance with the terms and conditions offered.
Credit documents – All the documents that the future debtor must make available to the banking or non-banking institution for the approval and granting of the requested credit.
Co-debtor – An individual or legal person who participates, together with the debtor, in the payment of the bank loan obtained by him.
Real estate valuation – Process by which the banking institution evaluates the real estate financed through a certified appraiser. The valuation of the property, which is the guarantee for granting the loan, is necessary because the banking institution finances an amount less than its equivalent value. For individuals, the bank offers a maximum of 85% of the value of the property, and for legal entities, the bank offers up to 75% of its value.
Degree of indebtedness or monthly rate / income ratio – The ratio between the monthly amount that the debtor has to pay to the banking institution for the loan obtained, the amount of the monthly installment, and his net income. The maximum limit of this ratio differs from one bank to another and each bank has its own internal policy on calculating risk factors when deciding to offer a loan.
Banking institution – Financial institution (bank).
Non-banking institution (NFI) – An entity that carries out lending activities on a professional basis, under the conditions established by law. These non-banking institutions offer the same types of loans as banks, on lighter terms, but with higher interest rates than in the case of loans from banks.
Mortgage – The right of the banking or non-banking institution over the assets that the debtor has put as collateral for obtaining the desired loan. If the debtor interrupts the repayment of the loan, the bank has full rights over these assets to recover the damage caused by the debtor.
Lending period – The contractual period of time from obtaining the loan to its full payment by the debtor. After the loan is paid, the credit period ends.
Seizure – Withholding from the salary of a sum of money in the name of a debt. Wage seizure occurs when the debtor delays or interrupts the payment of installments for the loan obtained, or does not pay on time its current debts to various institutions (example: fines, taxes and duties).
Risk – The possibility that the bank / NFI estimates when considering whether or not to offer a loan to an individual or legal person. The calculation of the risk factor aims to avoid a possible damage.
Installment – The amount of money paid monthly by the debtor to pay a bank loan. The monthly installment comprises part of the value of the loan, together with the interest related to it, as well as the fees applicable to it (example: administration fee, life insurance).
Employment salary – The salary of the individual person according to the work book or the individual employment contract.
Net salary – The amount of money left to the person after the following donations are deducted from the gross salary: taxes, duties, various deductions and contributions.
Gross salary – The amount of the employment salary, together with the permanent increases that the person benefits from every month. If these bonuses do not exist, the gross salary is equal to the employment salary.
Maturity – The date on which the term of payment of a loan expires or the term on which the term of payment of an installment expires. After this period, the creditor may charge penalties. The amount of these penalties is included in the credit agreement.
Credit balance – The amount of money left to be repaid from a loan.
Occasional bonuses – Additional income that a person earns occasionally. Example: bonuses, night bonuses, increased salary. Banking and / or non-banking institutions do not usually take these cash increases into account when calculating eligible net income.
Permanent bonuses – Income that a person constantly receives and that contributes to the value of the net salary. Permanent increases are taken into account by banking institutions. Example: overtime, monthly, quarterly bonuses, sales commissions.
Eligible income – The amount of money that the bank considers optimal for a debtor to have the financial capacity to repay a certain loan. Each bank determines, according to the profile of the future debtor and the amount of money it wants to borrow, which is the amount that ensures the highest economic efficiency for the payment of the loan according to the credit agreement.