How to use this glossary
Start with the term in a quote or contract, then follow the linked guide for edge cases or open the calculator to test the cost with your own figures. Definitions explain the concept; written product terms control the transaction.
Borrowing terms
Annual percentage rate (APR)
A yearly rate intended to combine interest with certain finance charges. APR is useful for comparison, but it may not include every optional or event-driven cost.
Continue with APR versus interest rate or True APR calculator.
Nominal interest rate
The stated rate used to calculate periodic interest before considering compounding or most fees. It is not the same as the total borrowing cost.
Continue with How rates differ or Loan total cost calculator.
Principal
The amount borrowed or the remaining loan balance on which interest is calculated. A payment can contain both principal and interest.
Continue with Amortization explained or Early payoff calculator.
Finance charge
The dollar cost of consumer credit under the applicable disclosure rules. It can include interest and qualifying fees, but the exact legal scope depends on the product and jurisdiction.
Continue with Origination fees or Borrowing cost guide.
Origination fee
A charge for making or processing a loan. When deducted from proceeds, it reduces the cash received even though repayment may still be based on the full principal.
Continue with How origination fees work or Model the fee in APR.
Amortization
A repayment schedule that divides payments between interest and principal over time. Early fixed-loan payments often contain more interest because the balance is larger.
Continue with Read an amortization schedule or Calculate the schedule cost.
Balloon payment
A large payment due at the end of a loan after smaller scheduled payments did not fully repay principal. The final cash need should be included in any affordability test.
Continue with Balloon payment risks or Compare loan structures.
Variable rate
An interest rate that can change using a stated index, margin and adjustment schedule. A starting payment does not show the payment after future rate resets.
Continue with Variable-rate risk or ARM rate caps.
Prepayment penalty
A contractual charge that may apply when principal is repaid early or the loan is refinanced. Its trigger, calculation and expiry should be checked in the written agreement.
Continue with Prepayment penalty checks or Early payoff calculator.
Net loan proceeds
The cash a borrower actually receives after any fees withheld at closing. Comparing payments with net proceeds can reveal a higher effective cost than the note rate suggests.
Continue with Fees deducted from proceeds or Calculate a cash-flow rate.
Credit cards terms
Grace period
A period in which qualifying purchases may avoid interest when the required balance is paid under the card agreement. Cash advances and carried balances can follow different rules.
Continue with Credit card grace periods or Credit card cost guide.
Minimum payment
The least amount required by the due date to keep an account current. Paying only that amount can extend payoff and increase interest substantially.
Continue with Cost of minimum payments or Credit card payoff calculator.
Balance transfer fee
A charge added when debt moves to another credit card, commonly calculated as a percentage of the transferred balance. It is owed even when the promotional APR is zero.
Continue with Balance transfer fees or Balance transfer calculator.
Deferred interest
Interest that can be assessed retroactively if a promotional balance is not fully paid by the deadline. It differs from a true zero-percent period that begins charging interest only after expiry.
Continue with Deferred-interest promotions or Test a promotional payoff.
Ownership terms
Total cost of ownership
The purchase, financing, operating, maintenance, risk and exit costs consumed over a defined holding period, net of value recovered at sale.
Continue with Total cost of ownership method or Ownership cost guide.
Depreciation
The reduction from acquisition value to expected resale value over time. For many vehicles and devices, it is a larger ownership cost than routine maintenance.
Continue with Car depreciation or Depreciation calculator.
Resale value
The amount an owner expects to recover at exit before or after selling costs. Because it is uncertain, a strong comparison tests more than one resale scenario.
Continue with Resale value scenarios or Car ownership calculator.
Opportunity cost
The value of the best realistic alternative given up when money or time is committed. It should be shown as an assumption range, not as a guaranteed return.
Continue with Using opportunity cost carefully or Rent versus buy calculator.
Sinking fund
Money set aside gradually for a known future replacement or repair. The contribution can be estimated from expected cost and remaining useful life.
Continue with Building a repair reserve or Maintenance reserve calculator.
Deductible
The amount a policyholder generally pays on a covered claim before insurance pays according to the contract. A higher deductible reduces some premiums but increases retained risk.
Continue with Car insurance deductibles or Home insurance deductibles.
Negative equity
A condition in which loan payoff is greater than the asset's current value. Selling or trading can require extra cash or roll the shortfall into new debt.
Continue with Negative-equity trade-ins or Auto equity calculator.
Decisions terms
Break-even point
The time or usage level at which cumulative savings equal an upfront cost. A break-even after the planned exit date does not support the purchase on cost alone.
Continue with Refinance break-even or Energy payback calculator.
Holding period
The time between acquisition and sale, payoff or replacement. Comparisons should use the same holding period because fees and resale value change with time.
Continue with Set the ownership boundary or Lease versus buy calculator.
Consumed cost
Money spent without creating a recoverable asset, such as interest, insurance or maintenance. Principal repayment is cash outflow but usually becomes equity rather than consumed cost.
Continue with Separate cost from cash flow or Homeownership cost calculator.
For a complete decision path, begin with the guide library, use the matching cost calculator, and read the calculation methodology before relying on an estimate.