Importance of the Equal Credit Opportunity Act (ECOA) The Equal Credit Opportunity Act (ECOA) is a crucial piece of legislation that plays a significant role in promoting fairness and equality in the lending industry. The act prohibits lenders from discriminating against borrowers based on certain protected characteristics, such as race, … …
Definition of Notching Debt Notching debt is a term used in the financial industry to describe the practice of assigning different credit ratings to different tranches or levels of debt within a single entity or issuer. This practice is commonly employed by credit rating agencies to differentiate the risk levels … …
Definition of Revolving Credit Revolving credit is a type of credit that allows borrowers to access a predetermined amount of funds on an ongoing basis. Unlike installment loans, which have a fixed repayment schedule and a set end date, revolving credit provides borrowers with the flexibility to borrow and repay … …
Definition of Over-Collateralization Over-collateralization is a financial strategy that involves pledging more assets or collateral than the amount of debt or loan being secured. It is commonly used in various financial transactions, such as loans, bonds, and structured finance products. When an individual or organization seeks a loan or issues … …
Definition of Debit Balances In the world of finance, a debit balance refers to the amount of money that an investor owes to their broker in a margin account. It represents the borrowed funds used to purchase securities or other financial instruments. When an investor opens a margin account, they … …
Transferable Letter of Credit: Definition and Advantages A transferable letter of credit is a financial instrument that allows a beneficiary to transfer all or part of the credit they receive to another party. This type of letter of credit is commonly used in international trade transactions, where multiple parties are … …
Definition of Per-Transaction Fees Payment processors and financial institutions charge Per-Transaction Fees to cover the expenses involved in authorizing, verifying, and settling transactions. These fees vary depending on factors such as transaction volume, transaction value, and the payment method used. Benefits of Per-Transaction Fees Per-Transaction Fees provide several benefits to … …
Definition and Functioning of Open-End Credit How Does Open-End Credit Work? Open-end credit typically has a variable interest rate, which means the interest rate can change over time based on market conditions. The interest is calculated based on the outstanding balance, and borrowers are required to make minimum monthly payments … …
Obligor Definition, Responsibilities, Scenarios, and Types Responsibilities of an Obligor The responsibilities of an obligor vary depending on the nature of the agreement or contract. In general, an obligor is required to fulfill certain obligations, such as: Repaying a loan or debt within a specified timeframe Making regular payments towards … …
What is a Hard Inquiry? During a hard inquiry, the lender or creditor will review your credit history, including your payment history, credit utilization, and any previous credit inquiries. They use this information to assess your creditworthiness and determine whether to approve your application. How does it work? When you … …
Fair Debt Collection Practices Act: Definition and Rules The Fair Debt Collection Practices Act (FDCPA) is a federal law that sets guidelines and regulations for debt collectors in the United States. It was enacted in 1977 with the aim of protecting consumers from abusive and unfair debt collection practices. Definition … …
Fair Credit Billing Act: Consumer Protection Explained The Fair Credit Billing Act (FCBA) is a federal law that provides consumer protection in cases of billing errors and unauthorized charges on credit card accounts. It was enacted in 1974 and is enforced by the Federal Trade Commission (FTC). What is the … …
Default Risk Definition Default risk refers to the possibility that a borrower or debtor will fail to meet their financial obligations, such as repaying a loan or making interest payments. It is a key concept in the field of finance and is crucial for lenders, investors, and credit rating agencies … …