Connaissances en Crédit

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Credit glossary

Amortisation (of capital) Amortisation: For a loan, amortisation is the capital repaid at each repayment date. By extension, we speak of an amortisation period (after a grace period, for example) when the loan capital actually begins to be repaid.
Constant amortisation On a constant amortisation loan, the same amount of capital is repaid at each instalment. The amount of the instalments (capital + interest) therefore decreases over time. If, on the other hand, the repayment amount is fixed, you have a loan with constant repayments.
Negative amortisation No capital is repaid. On the contrary, the difference between the amount of interest and the amount of the instalment is added to the outstanding capital.
Fine amortisation A loan where the capital is repaid only on the final instalment.
Loan insurance (or credit insurance) The purpose of this insurance, for which the lender is the beneficiary, is to guarantee the lender in the event of the borrower's death or disability. Banks almost always require "death" and "total disability" cover for home loans. Temporary partial invalidity" cover is strongly recommended if the loan is for the purchase of the borrower's main residence. Unemployment cover" is optional and covers repayment of all instalments (for the best contracts), or partial and progressive repayment in view of the degressive nature of ASSEDIC.
Rate cap Capping of interest rate increases on variable rate loans. This cap may be expressed as an absolute value (e.g. 4.50%), or as a relative value (e.g. initial rate + 2%). The terms of this cap (index, level, duration and conditions) are defined in the contract and may also include a floor rate limiting the downward variation in the rate. The combination of a floor rate and a cap rate creates a rate tunnel.
Capital Amount of credit granted by the lender. The capital can be paid in one or more instalments.
Outstanding capital Amount of capital remaining to be repaid by the borrower on a given date. It is used as the basis for calculating the interest on the next repayment. In a variable-rate contract, the lender is obliged to inform the borrower once a year of the amount of capital still to be repaid.
Financial expenses These include loan repayments, compulsorily linked insurance premiums, rents and pensions paid.
Bridging loan This type of loan is generally granted at maturity, pending the receipt of a certain amount of money, in particular when a property is sold. The bank may or may not require interest to be paid during the term of the loan.
Partial deferment (of amortisation) Period during which the borrower does not repay any capital. They only pay interest on the loan. Insurance premiums are generally collected during the grace period.
Total deferral (of amortisation) Period during which the borrower repays neither capital nor interest. This interest is added to the outstanding capital. Only the insurance contributions are generally collected during the period of total deferment.
Amortisation period Period during which the loan is repaid in capital. This period may be different from the duration of the loan if it includes a grace period.
Deadline Repayment date: This is the name given to the financial transaction involving periodic repayment of the loan. It is characterised by its date and frequency.
Home loan guarantee This guarantee protects the bank in the event of default on repayment of the monthly mortgage instalments, and ensures that the outstanding capital is repaid. The most common types of guarantee are: guarantee, mortgage, lender's lien (PPD) and pledge.
Interim interest Interim interest is the term used in contrast to interest on a regular instalment when, in the case of a gradual release of funds, this interest is generated during the release period on funds that have already been released. Interim interest is also calculated when the duration of the first instalment does not correspond exactly to the duration stipulated in the repayment schedule.
I.R.A. (early repayment indemnities) Compensation paid to the bank when the borrower repays the loan before the date specified in the amortisation schedule. This corresponds to 6 months' interest due, with a ceiling of 3% of the outstanding capital for home loans and 1% for consumer loans.
Principal The principal is the part of the capital that is repaid at maturity. It is a little-used synonym for amortisation.
Early repayment Possibility for the customer to repay part or all of a loan before the end of the contract. The bank may charge early repayment fees (I.R.A.) for this option.
Total revenues This includes income from salaried or similar employment, pensions received, social benefits or income, rental income and financial income.
Depreciation schedule Table showing the amount owed by the borrower on each instalment of the loan, broken down as follows: capital, interest, insurance premium (where compulsory) and capital outstanding after each instalment.
Capped rate Rate subject to a capping mechanism (see rate cap)
Actuarial rate This is an actuarial rate technique used to transform the annual rate into a periodic rate.
Annual percentage rate of charge (APR) Annual percentage rate of charge (APR): Annual percentage rate of charge that includes interest and all the costs associated with granting a loan, such as application fees, guarantees and insurance. It is used to measure the total cost of credit. It must never exceed the usury rate in force on the date the loan offer is issued. The TEG, unlike the TAEG, is expressed as a proportional annual rate and applies mainly to business loans.
Debt ratio Rate expressing the ratio of financial charges to total income.
Proportional rate Rate technique consisting of dividing the annual rate by the number of maturities in the year to obtain the periodic rate.
Periodic rate Rate used on the outstanding capital to calculate the interest on an instalment. The periodic rate depends on the frequency of the loan (monthly, annual, etc.).
Interest rate (annual) Percentage used to calculate the bank's annual remuneration on a sum of money lent to the borrower.
Nominal rate or lending rate (annual) This is the (annual) rate of the loan when it is calculated at the proportional rate.
Adjustable rate (or variable rate) Interest rate: Rate that can rise or fall over the term of the loan according to the terms and conditions set out in the loan contract. Changes in the rate depend on changes in one or more indices and can be monthly, quarterly, annual or multi-year. A variable-rate loan may include a fixed-rate period and variation limits