Definitions

General loan terms

Lender - an organisation that is lending money.

Borrower - a party that is borrowing money. The borrower can be a private individual or a business organisation.

Loan - a particular amount of money the borrower borrows from a lender with the agreement to pay it back, usually with interest.

Principal - the initial amount paid by the lender to the borrower. And the remaining amount of the loan debt after the repayments.

Interest - the price that the borrower pays for borrowing the loan.

Penalty - the fees that can be applied if the borrower does not meet the obligations set in the loan contract.

Payment holiday - the arrangement with the lender that allows the borrower to make no repayments during the agreed period.

Loans classification

Umbrella loan or umbrella credit facility - a type of loan that provides a borrower with a larger credit limit, allowing for the issuance of multiple smaller loans within a single larger limit.

Unsecured - when there is no valuable item that secures loan repayments.

Secured - when the borrower pledges some valuable item, collateral, to secure loan repayments.

Loan flow terms

Loan product - the specific set of loan features, such as interest rates, repayment periods, and eligibility criteria, a lender offers for granting loans.

Loan application - is a process when a borrower applies for a loan, and a lender processes the loan application and evaluates the risks.

Loan offer - is the process when the lender calculates the main financial parameters of the loan, presents them, and negotiates them with the borrower.

Loan contract - is the process of creating a loan contract based on the conditions of the accepted loan offer. Loan contracts are created automatically when the loan offer is accepted.

Loan disbursement - is the process when the lender pays the agreed-upon amount into the borrower’s account, which becomes available for use.

Loan repayment - is the process when the borrower makes loan repayments according to the repayment schedule.

Secured loans terms

Asset - a valuable item that a lender can use to recover obligations set in the loan contract if a borrower cannot repay a loan. Some examples of an asset: real estate, vehicles, etc.

Collateral - an asset that is connected to the loan contract.

Pledge - is a collateral held by a lender in return for lending funds. Once the loan is paid off the lender transfers the pledged asset back to the borrower.

Pledgee - a party receiving the collateral and providing the loan, usually a lender. Pledger - a borrower, an individual or organisation providing a collateral, usually a borrower.

Suretyship - is an agreement in which a third party, a guarantor, who takes a financial responsibility for the debt if the borrower cannot pay for the loan. Liabilities - an arrangement that specifies the financial responsibility of the pledge towards the pledged collateral.