Nova Credit Glossary: Loan and Credit Terms From A to Z

Nova credit terms from A to C cover how a personal loan is priced and repaid, plus the credit report basics lenders review. Amortization, APR, autopay, collateral and credit score appear in nearly every offer readers compare.

Amortization

Amortization is the process of paying off a personal loan through equal scheduled payments that each cover that month's interest plus part of the principal. Early payments lean toward interest and later ones toward principal. On the representative example of $2,000 at 24.99% APR over 12 months, every payment is about $190.08, yet the principal portion grows each month as the balance shrinks.

Annual percentage rate (APR)

The annual percentage rate, or APR, is the yearly cost of borrowing expressed as a percentage, including interest plus required fees such as an origination fee. Because it bundles both, APR is the best single number for comparing nova credit personal loan offers of the same term. APRs through lenders in our network commonly run from about 6% to 35.99%. Our guide to current APR ranges explains what moves them.

Autopay

Autopay is an arrangement that lets a personal loan lender automatically draft your scheduled payment from your checking account on each due date. Some lenders offer a small APR discount, often about 0.25% to 0.50%, for enrolling. Autopay lowers the risk of a forgotten payment, but you still need enough money in the account on draft day to avoid a returned-payment fee or an overdraft charge.

Bankruptcy

Bankruptcy is a federal court process that lets a person discharge or reorganize debts they cannot repay. A Chapter 7 filing can stay on a credit report for up to ten years and a Chapter 13 for up to seven. Many personal loan lenders decline applicants with an open or very recent bankruptcy, while some consider people whose case was discharged a few years earlier and who have rebuilt steady income.

Charge-off

A charge-off happens when a lender writes a seriously delinquent debt off its books as a loss, usually after about 120 to 180 days without payment. The borrower still owes the money, and the account may be sold to a collection agency. A charge-off is one of the most damaging marks on a credit report and remains for up to seven years from the original delinquency.

Collateral

Collateral is an asset a borrower pledges to secure a personal loan or other loan, such as a vehicle title, savings account or certificate of deposit. If the borrower defaults, the lender can claim the collateral to recover its losses. Pledging collateral may lower the APR or help someone with fair credit get approved, but it puts the asset at risk if payments stop.

Cosigner

A cosigner is a second person who signs a loan agreement and accepts full legal responsibility for the debt if the primary borrower does not pay. A cosigner with stronger credit or income can improve approval odds or lower the rate offered. Missed payments damage both credit reports, so cosigning is a serious commitment, and not every personal loan lender accepts one.

Credit bureau

A credit bureau is a company that collects and maintains consumer credit information and sells it as credit reports. The three major U.S. bureaus are Equifax, Experian and TransUnion. Lenders report balances and payment history to one or more bureaus, and they pull reports from those bureaus when you apply, which is why your score can differ slightly from one bureau to another.

Credit report

A credit report is a record of your borrowing history, listing open and closed accounts, balances, payment history, inquiries and public records such as bankruptcies. You can request a free copy from each of the three major bureaus through the official annual report site. Checking your report before submitting a nova credit request helps you spot errors, like an account that is not yours, and dispute them early.

Credit score

A credit score is a three-digit number, commonly ranging from 300 to 850, that summarizes how likely you are to repay debt based on your credit report. Scores above about 670 are generally considered good, and 580 to 669 is often called fair. Lenders use your score to set approval and pricing on any nova credit request. Our article on what credit score you need for a personal loan covers the ranges in detail.

Credit utilization

Credit utilization is the share of your available revolving credit that you are currently using, shown as a percentage. Someone with $1,800 in card balances on $6,000 in total limits has 30% utilization. People who search nova credits often learn that keeping utilization below about 30%, and ideally under 10%, tends to help scores. Paying down card balances with a fixed-rate personal loan can lower utilization, though new card spending reverses the gain.

Nova credit terms from D to H explain debt ratios, missed-payment stages, interest structure and credit checks. Readers searching nova credits definitions most often look up debt-to-income ratio, fixed rate and hard credit check in this range.

Debt consolidation

Debt consolidation means combining several debts, often high-rate credit card balances, into one new loan with a single fixed monthly payment. A borrower carrying $2,000 across two cards at about 28% APR might consolidate into a personal loan at a lower estimated rate and a set payoff date. Readers researching nova credits should note that consolidation saves money only when the new APR is lower and the old cards are not run back up.

Debt-to-income ratio

Debt-to-income ratio, or DTI, is the share of your gross monthly income that goes toward debt payments. Someone earning $4,000 a month who pays $1,000 toward a car loan, a card minimum and student loans has a DTI of 25%. Many lenders become cautious when DTI, including the new loan payment, passes about 35% to 40%, though each lender sets its own limit.

Default

Default is the failure to repay a personal loan according to the terms of the loan agreement, typically after several consecutive missed payments. Once a loan is in default, the lender may demand the full balance, send the account to collections, report the default to the credit bureaus, or, for a secured loan, claim the collateral. The exact point at which default begins is defined in each agreement.

Delinquency

Delinquency describes a loan payment that is past due but not yet in default. On a nova credit loan, lenders typically report a delinquency to the credit bureaus once a payment is 30 days late, and later marks follow at 60 and 90 days. Even one 30-day delinquency can lower a good score noticeably, so contacting the lender before a due date passes is usually the better move.

Due date

The due date is the day each scheduled personal loan payment must reach the lender to count as on time. It appears in the loan agreement and on every statement. Many lenders let nova credits borrowers move the due date once, for example from the 3rd to the 18th, so it lands a few days after a regular paycheck, which helps prevent overdrafts and late fees.

E-signature

An e-signature is an electronic signature used to accept a personal loan agreement online, carrying the same legal weight as ink on paper under federal law. Typing your name or clicking a signature box on a lender's site commits you to the loan's terms. Nothing becomes binding on a nova credit match until you e-sign the lender's agreement, so read the full document before clicking.

Fixed rate

A fixed rate is an interest rate that stays the same for the entire life of the loan. With a fixed-rate installment loan, the monthly payment never changes, which makes budgeting easier. Most personal loan offers in the $500 to $5,000 range carry fixed rates. A fixed rate protects the borrower if market rates rise, but does not drop if rates fall.

Grace period

A grace period is a short window after a personal loan due date during which a lender accepts a payment without charging a late fee, commonly about 10 to 15 days on personal loans. A grace period does not always stop interest from accruing, and a payment made inside it may still be reported late if it reaches 30 days. Nova credits shoppers should check the agreement for the exact length.

Hard credit check

A hard credit check, or hard inquiry, happens when a personal loan lender pulls your full credit report to make a final lending decision. It typically lowers a score by a few points for a few months and stays visible on the report for about two years. Several hard checks in a short time can signal risk, so it helps to limit full applications to offers you intend to accept.

Hardship plan

A hardship plan is a temporary arrangement a lender may offer when a borrower faces job loss, illness or another setback that makes regular payments difficult. Options can include a short payment deferral, a reduced payment for a few months, or a modified schedule. Lenders are not required to offer one to nova credits borrowers, and interest may still accrue, but asking early improves the chances of approval.

Nova credit terms from I to O focus on loan structure and the documents that govern a personal loan, including installment loans, interest rate, loan term, monthly payment and the origination fee lenders may deduct at funding.

Installment loan

An installment loan is borrowed as one lump sum and repaid in a fixed number of scheduled payments, usually monthly, until the balance reaches zero. Personal loans, auto loans and mortgages are all installment loans. A $1,000 installment loan at an estimated 17.99% APR over 12 months, for instance, costs about $91.68 a month, with a clear payoff date from day one.

Interest rate

The interest rate is the percentage a personal loan lender charges each year on the outstanding principal, not counting fees. It differs from APR, which also folds in required fees like an origination fee. Two offers with the same 20% interest rate can carry different APRs if only one charges a fee, so the interest rate alone can understate what a loan really costs.

ITIN

An ITIN, or Individual Taxpayer Identification Number, is a nine-digit number the IRS issues to people who must file U.S. taxes but are not eligible for a Social Security number. Some lenders accept an ITIN in place of an SSN to verify identity and check credit, while others do not. Nova credit applicants should ask before applying, because ITIN acceptance varies widely from one lender to the next.

Late fee

A late fee is a charge a lender adds when a personal loan payment arrives after the due date and any grace period. It is often a flat amount, such as about $15 to $40, or a percentage of the missed payment, and state law may cap it. Late fees are listed in the loan agreement, and repeated late payments can also lead to credit reporting.

Lender

A lender is the company that reviews your personal loan application, makes the credit decision, funds the loan and collects payments. Lenders set every rate, fee and term, and they must be licensed or permitted to lend in your state. Our service is not a lender; lenders in our network decide whether to present an offer after reviewing a request.

Loan agreement

A loan agreement is the binding contract between a borrower and a lender that spells out the amount, APR, fees, payment schedule, total cost, late-payment rules and what happens in default. Federal law requires key cost figures to be disclosed before you sign. The loan agreement, not any advertisement or estimate, controls what a personal loan actually costs you.

Loan term

The loan term is the length of time you have to repay a personal loan, usually stated in months. Personal loans from $500 to $5,000 typically run about 3 to 36 months. A longer term lowers the payment but raises total interest: $2,000 at 24.99% APR costs about $2,280.94 over 12 months but about $2,862.33 over 36 months, as estimates.

Matching service

A matching service connects personal loan borrowers with lenders without lending money itself. You submit one request form, and lenders in the service's network review it and may present offers. Using our service is free and carries no obligation, while each lender handles the credit decision, funding and repayment. People comparing nova credit options use a matching service to see several offers from one form.

Monthly payment

The monthly payment is the fixed amount due each month on an installment loan such as a personal loan, covering that month's interest plus part of the principal. It depends on the amount borrowed, the APR and the term. For example, $1,500 at an estimated 24.99% APR costs about $142.56 a month over 12 months. Our personal loan payment calculator estimates other combinations.

Origination fee

An origination fee is a one-time charge some lenders take for processing a personal loan, often about 0% to 10% of the amount borrowed. Many lenders deduct it from the deposit, so a $2,000 loan with a 4% fee would leave about $1,920 in your account while you repay the full $2,000 plus interest. The fee is always reflected in the loan's APR.

Terms from P to R deal with paying a personal loan off and checking your odds before you apply. Prequalification, principal, prepayment penalty and refinancing are the entries nova credit readers use most when comparing offers.

Payoff amount

The payoff amount is the exact sum needed to close a personal loan in full on a specific date, including the remaining principal plus interest accrued since the last payment and any fees owed. It differs slightly from the balance on your statement because interest accrues daily. Nova credit borrowers should request a written payoff quote from the lender, usually valid for about 10 days, before sending a final payment.

Prepayment penalty

A prepayment penalty is a fee some lenders charge when a borrower pays off a loan early, compensating the lender for interest it will no longer earn. Many personal loan lenders do not charge one, so paying ahead can cut total interest. Check the loan agreement for the words "prepayment" or "early payoff" before signing, and ask how extra payments are applied.

Prequalification

Prequalification is an early review in which a lender uses a soft credit check and the details you provide to estimate whether you may qualify and at what rate. It does not affect your credit score and does not commit either side. Prequalified terms can change after full verification, so treat a prequalified APR as an estimate rather than a final offer.

Principal

Principal is the amount of money you borrow on a personal loan, before any interest is added. Each monthly payment on an installment loan reduces the principal by some amount, and interest is calculated on whatever principal remains. On a $2,000 loan, the principal is $2,000 even if an origination fee is deducted, which is why the amount received can be smaller than the principal you repay.

Promissory note

A promissory note is a signed written promise to repay a specific sum under stated terms, such as the interest rate, payment schedule and maturity date. For many personal loans, the promissory note is part of the loan agreement rather than a separate document. Signing it, on paper or electronically, creates the legal obligation that allows a lender to collect.

Refinancing

Refinancing means replacing an existing personal loan with a new one, usually to get a lower APR, a smaller payment or a different term. Someone who borrowed at about 35.99% APR and later improved a credit score might refinance the remaining balance at a lower rate. For nova credits borrowers, refinancing helps only when savings outweigh any new origination fee and the extended time spent paying interest.

Representative example

A representative example is an illustration of what a typical personal loan could cost, using sample figures rather than a personal offer. Our representative example is $2,000 for 12 months at 24.99% APR with no origination fee: about $190.08 a month, $2,280.94 repaid and $280.94 in interest. Your actual nova credit terms depend on the lender, your credit and your state.

Returned payment fee

A returned payment fee is a charge a lender applies when a scheduled payment bounces, usually because the checking account lacks enough funds on draft day. The lender's fee, often about $15 to $30 where state law permits, may come on top of an overdraft or insufficient-funds fee from your bank. Moving your due date closer to your paycheck helps prevent it.

Revolving credit

Revolving credit is an open line you can borrow from, repay and borrow from again up to a set limit, such as a credit card or line of credit. Payments vary with the balance, and there is no fixed payoff date. A personal loan, by contrast, is an installment product with a set term, which is why the two are counted differently in credit scoring models.

Nova credit terms from S to Z cover how personal loans are secured, how interest accrues, and how lenders verify an application. Secured and unsecured loans, soft credit checks, underwriting and variable rates close out the A to Z list.

Secured loan

A secured loan is backed by collateral, such as a car title or savings account, that the lender can claim if the borrower defaults. Because the lender's risk is lower, a secured loan may offer a lower APR or easier approval for fair credit. Our comparison of secured vs unsecured personal loans explains when pledging an asset makes sense.

Simple interest

Simple interest is charged only on the outstanding principal, not on previously accrued interest. Most personal loans use simple interest calculated daily or monthly, so paying earlier in a cycle, or paying extra, reduces the interest you owe. Compound interest, by contrast, charges interest on interest, which is common with credit cards that carry unpaid balances from month to month.

Soft credit check

A soft credit check, or soft inquiry, is a credit review that does not affect your credit score and is visible only to you on your own report. Lenders commonly use soft checks to prequalify applicants and show estimated rates. Checking your own score, or seeing which offers a nova credits request might return, typically involves a soft pull rather than a hard one.

Thin credit file

A thin credit file describes a credit report with few accounts or a short history, often fewer than three to five tradelines. Young adults, recent immigrants and people who have mostly used cash often have thin files. Lenders may find thin files hard to score, so steady income, a long-held checking account and a smaller request, such as $1,000, can carry more weight.

Total repayment

Total repayment is the full amount you will pay over the life of a personal loan, combining principal, interest and any fees financed into the balance. It appears in the federal disclosure as the total of payments. Comparing total repayment shows the true cost difference between terms: $3,000 at an estimated 24.99% APR totals about $3,421.42 over 12 months and about $4,293.49 over 36 months.

Truth in Lending disclosure

A Truth in Lending disclosure is the standardized cost summary federal law requires lenders to give borrowers before a consumer loan, including a personal loan, is finalized. It lists the APR, finance charge, amount financed and total of payments in a consistent format, making offers easier to compare side by side. Nova credit borrowers should look for this box near the top of the agreement before they e-sign.

Underwriting

Underwriting is the process a lender uses to evaluate an application and decide whether to approve it and on what terms. Underwriters review credit history, income, debt-to-income ratio, employment and identity documents. Automated underwriting can return a decision quickly, while manual review of self-employment income may take longer. Our personal loan eligibility checklist lists what underwriters usually request.

Unsecured loan

An unsecured loan is not backed by collateral, so approval and pricing rest on your credit, income and debt load. Most personal loans from $500 to $5,000 are unsecured. Without collateral, the lender's main recourse after default is collections and credit reporting rather than repossession, which is why unsecured loans often carry higher APRs than secured ones.

Variable rate

A variable rate is an interest rate that can change over the life of a loan, usually tied to a benchmark index plus a fixed margin. When the index rises, the payment or total cost rises too. Variable rates are more common on lines of credit and credit cards, while most personal loans in the $500 to $5,000 range carry fixed rates.

Verification

Verification is the step where a personal loan lender confirms the details on an application before funding, such as identity, income, address and bank account ownership. Lenders may ask for a pay stub, bank statements, a photo ID or a utility bill. For nova credits requests, answering verification requests quickly is one of the simplest ways to avoid funding delays, which typically add a business day or more.