Everest Business Funding Glossary of Personal Loan Terms

Loan paperwork is full of terms that sound alike but cost different amounts of money. If you are comparing everest business funding options for a car repair, a medical bill or a slow month in a side business, a few definitions can change which offer looks best. This glossary explains the words lenders use on personal loan offers, disclosures and agreements in plain English, so you can read an offer once and know exactly what you are agreeing to.

Every definition below is written for borrowers whose everest business funding search covers amounts between $500 and $5,000 with terms of roughly 3 to 36 months. Lenders set their own policies, so treat these as general explanations, and rely on each lender's own disclosure for the final terms of any loan.

How to use the everest business funding glossary

The glossary works best as a quick reference: jump to a letter group, read the short definition, and return to the offer you were reviewing with a clearer sense of what each line means for your budget.

Terms are sorted A to Z and grouped into five letter ranges. Each entry runs two to four sentences, so you can scan the list in a few minutes or search for a single word while an offer is open in another tab. Several other pages on our site link straight to individual entries, which is why each term has its own anchor.

When a word on a personal loan disclosure is unfamiliar, look it up before you sign rather than after. Everest funding requests often move quickly once an offer appears, and a two-minute lookup is cheaper than a surprise fee. Kim, a dental office manager in Oregon, noticed an origination fee on one offer and a slightly higher APR with no fee on another. Once she read both definitions, she saw that the APR already included the fee, which made the two offers easy to compare on a single number.

Six personal loan terms that matter most when comparing offers

APR, origination fee, loan term, monthly payment, prepayment penalty and total cost of borrowing matter most, because together they tell you what a personal loan really costs and how flexible it is.

• APR: the yearly cost of borrowing including most fees. Compare it first; see the APR definition.
• Origination fee: a one-time charge often taken out of the amount you receive, so a $2,000 loan with a 5% fee may deposit only $1,900.
• Loan term: longer terms lower the payment but raise total interest.
• Monthly payment: the number your budget has to absorb every month without strain.
• Prepayment penalty: most lenders in this range do not charge one, but confirm it before you sign.
• Total cost of borrowing: principal plus all interest and fees over the life of the loan.

As a representative example, a $2,000 personal loan for 12 months at 24.89% APR works out to about $189.98 a month and $2,279.78 repaid in total, or $279.78 in interest. These are estimates; your actual terms come from the lender. To test other amounts and terms, try the personal loan calculator, then check typical ranges on the rates page and the basic requirements on the eligibility page. Everest funding tip: write the APR, total repaid and any fee for each offer on one line so the comparison stays honest.

• A–C
• D–F
• G–L
• M–P
• Q–Z

Loan Terms A–C

Core cost terms such as amortization, APR and autopay discounts appear in this range, along with the credit vocabulary of bureaus, reports, scores, utilization, co-signers and collateral.

Amortization

Amortization is the process of paying off a loan through scheduled, equal payments that cover both interest and principal. Early payments put more toward interest, and later payments put more toward principal. An amortization schedule shows how each payment is split and how the balance falls over the loan term.

Annual Income

Annual income is the total amount you earn in a year before taxes, including wages, self-employment earnings and regular benefits. Lenders use it to judge whether you can afford a new personal loan payment. Report it accurately, because lenders may verify the figure with pay stubs or bank statements.

APR (Annual Percentage Rate)

APR is the yearly cost of borrowing expressed as a percentage, including the interest rate and most required fees such as an origination fee. Because it bundles those costs, APR is the most useful single number for comparing personal loan offers. Federal law requires lenders to disclose it before you sign.

Autopay Discount

An autopay discount is a small rate reduction, often around 0.25 to 0.50 percentage points, that some lenders offer when you set up automatic payments from your checking account. The discount lowers total interest slightly. Keep enough money in the account on each due date to avoid returned payment fees.

Balance Transfer

A balance transfer moves debt from one credit card to another card, usually to take advantage of a low or zero percent introductory rate. Most cards charge a transfer fee of about 3% to 5%. Once the promotional period ends, the remaining balance starts accruing interest at the card's regular rate.

Charge-Off

A charge-off happens when a lender writes off a debt as unlikely to be collected, usually after about 120 to 180 days of missed payments. You still owe the money, and the account may be sold to a collection agency. A charge-off can remain on your credit report for up to seven years.

Co-Signer

A co-signer is a second person who signs a loan agreement and becomes legally responsible for repayment if the main borrower does not pay. Adding a co-signer with stronger credit or income can improve approval odds or the rate offered. Missed payments appear on both people's credit reports.

Collateral

Collateral is an asset you pledge to secure a loan, such as a savings account, certificate of deposit or vehicle title. If you stop paying, the lender can take the collateral to recover its losses. Most personal loans in the $500 to $5,000 range are unsecured and require no collateral.

Credit Bureau

A credit bureau is a company that collects and stores information about how consumers use credit. The three national bureaus are Equifax, Experian and TransUnion. Lenders report your payment activity to them, and scoring models use bureau data to calculate your credit scores. You can request free copies of your reports.

Credit Report

A credit report is a detailed record of your credit accounts, balances, payment history, inquiries and certain public records such as bankruptcies. Lenders review it alongside your score before approving a loan. Checking your reports regularly helps you spot errors or unfamiliar accounts that could signal identity theft.

Credit Score

A credit score is a three-digit number, commonly ranging from 300 to 850, that summarizes how likely you are to repay borrowed money. Payment history and amounts owed carry the most weight. Higher scores usually qualify for lower APRs, though lenders also consider income and existing debt.

Credit Utilization

Credit utilization is the share of your available revolving credit that you are currently using. If you owe $1,500 on cards with a combined $5,000 limit, utilization is 30%. Keeping it below about 30%, and ideally lower, tends to help your credit score.

Loan Terms D–F

Debt-to-income ratio, default, disbursement and fixed rates fall in this group. Each one shapes whether an everest funding request gets approved or how predictable your payments will be.

Debt Consolidation

Debt consolidation means combining several debts, often credit card balances, into a single new loan with one monthly payment. It can lower the interest rate and simplify repayment. Savings depend on the new APR, fees and term, so compare the total cost against keeping your current debts.

Debt-to-Income Ratio

Debt-to-income ratio, or DTI, compares your total monthly debt payments with your gross monthly income. Someone paying $1,200 a month on debts while earning $4,000 has a 30% DTI. Many lenders prefer a ratio under about 36% to 40% after adding the new payment.

Default

Default occurs when you fail to repay a loan according to the agreement, typically after several missed payments. Consequences can include collection activity, added fees, a damaged credit score and possible legal action. Contacting your lender early about a hardship can sometimes prevent a default.

Disbursement

Disbursement is the moment a lender releases loan funds to you, usually by direct deposit into your checking account. Many personal loan lenders disburse within one to three business days after you sign. If an origination fee applies, it is often subtracted before the money reaches your account.

Due Date

The due date is the day each month your loan payment must reach the lender. Paying after it can trigger a late fee, and a payment 30 or more days late may be reported to the credit bureaus. Some lenders let you choose a due date that follows your paycheck.

Fixed Rate

A fixed rate is an interest rate that stays the same for the entire loan term. Your monthly payment does not change, which makes budgeting predictable. Most installment personal loans carry fixed rates, unlike many credit cards and lines of credit, whose rates can move.

Funding Time

Funding time is how long it takes to receive money after you accept a personal loan offer and complete verification. It ranges from the same or next business day with some lenders to a week with others. Bank processing schedules, weekends and holidays can add delays.

Loan Terms G–L

Inquiries, installment loans, interest, late fees and lines of credit live in this range. Knowing the difference between hard and soft inquiries alone can protect your score while you compare offers.

Grace Period

A grace period is a short window after the due date, often 10 to 15 days, during which a lender accepts a payment without charging a late fee. Not every lender offers one. Interest may still accrue during the grace period, so paying on time remains the better habit.

Gross Income

Gross income is what you earn before taxes, insurance and retirement contributions are deducted from your pay. Lenders typically use gross monthly income when calculating your debt-to-income ratio. Your take-home pay is lower, so budget your loan payment against net income instead.

Hard Inquiry

A hard inquiry occurs when a lender pulls your full credit report to make a final lending decision. It may lower your score by a few points and stays on your report for two years, though its effect usually fades within months. Lenders need your permission to run one.

Identity Verification

Identity verification is the step where a lender confirms you are who you say you are. It may involve matching your name, address and Social Security number against records, uploading a photo ID, or answering questions drawn from your credit history. Federal rules require lenders to verify identity.

Installment Loan

An installment loan is borrowed as a lump sum and repaid in fixed, scheduled payments over a set term. Most personal loans, auto loans and student loans are installment loans. Each payment covers interest and part of the principal until the balance reaches zero.

Interest

Interest is the price you pay to borrow money, charged as a percentage of the outstanding balance. On an amortizing loan, interest is calculated on the remaining principal, so it shrinks as you pay down the balance. Paying extra toward principal reduces total interest.

Joint Application

A joint application is a loan request submitted by two borrowers who share equal responsibility for repayment and often equal access to the funds. Lenders consider both incomes and credit histories. Unlike a co-signer, a joint borrower is a full owner of the loan from the start.

Late Fee

A late fee is a charge added when a payment arrives after the due date or the end of any grace period. It is often a flat amount, such as $15 to $40, or a small percentage of the payment, subject to state limits. Repeated late payments can also damage your credit.

Line of Credit

A line of credit is a revolving account that lets you borrow up to a set limit, repay, and borrow again. You pay interest only on the amount you use. Rates are often variable, which makes it more flexible but less predictable than an installment loan.

Loan Agreement

A loan agreement is the binding contract between you and a lender that lists the amount, APR, term, payment schedule, fees and your rights and duties. Read every page before signing. Keep a copy, because it governs questions about payoff, late fees and hardship options later.

Loan Term

The loan term is the length of time you have to repay a loan, usually stated in months. Shorter terms carry higher payments but lower total interest; longer terms do the reverse. For smaller personal loans, terms of 3 to 36 months are common.

Loan Terms M–P

Monthly payments, origination fees, prepayment penalties and principal sit in this section. Together they explain how much reaches your account and how much you actually repay over time.

Military Lending Act

The Military Lending Act is a federal law that protects active-duty service members and their dependents. It caps the military annual percentage rate on most consumer loans at 36% and bans certain terms, including mandatory arbitration and some prepayment penalties. Lenders check eligibility before making an offer.

Minimum Payment

The minimum payment is the smallest amount you must pay on a revolving account, such as a credit card, to stay in good standing. Paying only the minimum keeps the account current but stretches repayment and raises total interest. Installment loans use a fixed payment instead.

Monthly Payment

The monthly payment is the fixed amount due each month on an installment loan, covering interest and part of the principal. It depends on the amount borrowed, the APR and the term. Pick a payment that fits comfortably in your budget even during a slower month.

Net Income

Net income is your take-home pay after taxes and other deductions are withheld. It is the money actually available to cover rent, groceries and loan payments. Lenders usually ask for gross income, but your own budget should be built around net income.

Origination Fee

An origination fee is a one-time charge some lenders collect for processing a loan, commonly 1% to 8% of the amount borrowed. It is often deducted from the funds before disbursement. Because it is included in the APR, comparing APRs captures its effect on cost.

Prepayment Penalty

A prepayment penalty is a fee some lenders charge if you pay off a loan early, compensating them for lost interest. Most lenders offering smaller personal loans do not charge one, but always check the agreement. Paying early without a penalty can cut total interest noticeably.

Prequalification

Prequalification is an early estimate of whether a lender may approve you and on what terms, usually based on a soft credit check. It does not affect your score and is not a final approval. The lender confirms terms after reviewing documents and running a full application.

Principal

Principal is the original amount you borrow, or the portion of it you still owe. Interest is calculated on the principal balance. Each scheduled payment reduces it a little, and any extra payment applied to principal shortens the loan and lowers total interest.

Promissory Note

A promissory note is a signed written promise to repay a specific sum under stated terms. In consumer lending, the note is often part of the loan agreement. It is a legally enforceable document, so the lender can pursue collection if the terms are not met.

Loan Terms Q–Z

Rate caps, repayment schedules, secured and unsecured loans, soft inquiries and working capital complete the list. Several decide which lenders can serve an everest business funding request and at what price.

Rate Cap

A rate cap is a legal limit on the interest or APR a lender may charge. Many states cap rates on smaller installment loans, and some cap them at or near 36%. Because caps vary, the offers available to you depend partly on the state where you live.

Repayment Schedule

A repayment schedule lists every payment due on a loan, with dates and amounts and often the interest and principal portion of each. Lenders provide it at signing. Reviewing it helps you plan around other bills and shows exactly when the loan will be paid off.

Returned Payment Fee

A returned payment fee is charged when a scheduled payment bounces because your account lacks funds or was closed. The amount is commonly $15 to $30, and your bank may add its own overdraft charge. Keeping a small cushion in your checking account helps avoid both.

Secured Loan

A secured loan is backed by collateral, such as a savings account or vehicle, that the lender may take if you default. Secured loans often carry lower rates and can be easier to qualify for with fair or limited credit, but they put the pledged asset at risk.

Simple Interest

Simple interest is calculated only on the outstanding principal, not on interest that has already built up. Most personal loans use simple interest, so paying early or making extra payments directly reduces the interest you owe. Compound interest, by contrast, charges interest on accumulated interest.

Soft Inquiry

A soft inquiry is a credit check that does not affect your credit score. It happens when you check your own credit, when lenders prescreen you, or when you check rates through a prequalification form. Only you can see soft inquiries on your credit report.

Total Cost of Borrowing

Total cost of borrowing is everything you pay over the life of a loan beyond the principal, including all interest and fees. Comparing this figure, along with the total repaid, shows the true difference between offers that have similar monthly payments but different terms.

Underwriting

Underwriting is the lender's process of evaluating your personal loan application to decide whether to lend and on what terms. Underwriters review credit history, income, debt-to-income ratio and identity documents. Automated underwriting can finish in minutes, while manual review may take a day or two.

Unsecured Loan

An unsecured loan requires no collateral; the lender relies on your credit, income and promise to repay. Most personal loans are unsecured. Because the lender takes more risk, rates are usually higher than on secured loans, and approval depends more heavily on your credit profile.

Variable Rate

A variable rate is an interest rate that can rise or fall over the life of a loan, usually tied to a benchmark index. Payments may change when the rate moves. Lines of credit and credit cards often have variable rates, while most installment loans are fixed.

Working Capital

Working capital is the money a business has available to cover day-to-day expenses such as inventory, supplies and payroll, calculated as current assets minus current liabilities. Small business owners and side hustlers sometimes use a modest loan to bridge short-term working capital gaps.