Glossary of Loan Terms
Accelerated Payment: Paying more than the payment due amount (and interest and fees to date). This will reduce the loan principal and the repayment period.
Cancellation: Removal of the borrowerâs obligation to pay a portion or all of a loan's unpaid balance and accrued interest.
Capitalization: Occurs when loan interest has accrued but was not paid, and then the accrued interest is later added to the outstanding principal balance of the loan.
Co-maker: An individual who signs a loanâs promissory note along with the borrower and assumes equal liability for it.
Consolidation: Combination of multiple loans into a new loan with a single payment, usually with a longer payback period.
Deferment: Eligible status whereby repayment is suspended and interest does not accrue.
Delinquency: Failure to make loan payments on time or to fail to update loan status (in the case of deferment, forbearance or cancellation).
Default: Status whereby a loan is significantly past due.
Forbearance: The temporary cessation or reduction of payments for a certain period of time to relieve a borrower's financial hardship during loan repayment.
Grace Period: Time period (usually for a few months following graduation) when borrower is not required to repay the lender.
Master Promissory Note: A multiple-year document with a maximum dollar limit signed by the borrower promising to repay a loan according to specific loans and conditions.
Principal: The amount of money borrowed that remains unpaid, not including interest.
Promissory Note: A document that is signed by the borrower promising to repay a loan according to specific terms.