Rotating Credit and Savings Association (ROSCA).

A ROSCA is a type of informal savings club. Members of a ROSCA agree to make regular contributions into a common fund. The fund is then used to make loans to member of the group. The loans are typically given out in order of rotation, so that everyone in the group gets a chance to … Read more

Fully Indexed Interest Rate.

The fully indexed interest rate on a variable-rate mortgage is the rate that would apply if the index value were to increase by the maximum amount allowed before the interest rate is adjusted. For example, if the mortgage rate is 6.5% and the maximum index value increase is 2%, the fully indexed rate would be … Read more

Address Verification Service (AVS).

The Address Verification Service (AVS) is a system used to verify the address of a person or business. This service is often used by businesses that send out large quantities of mail, such as banks and credit card companies. The AVS system can also be used by individuals to verify their own address. The AVS … Read more

What Is a Triggering Term?

A triggering term is a term that, when triggered, results in the termination of a contract or agreement. Triggering terms are typically found in credit and debt agreements, and can be triggered by a number of different events, such as the failure to make a payment, the breach of another term of the agreement, or … Read more

How Obligors Work.

An obligor is a person or entity that has a legal obligation to another person or entity. In the context of credit and debt, an obligor is typically the borrower of a loan. The obligor is legally obligated to repay the loan in accordance with the terms of the loan agreement. If the obligor defaults … Read more

How Transferable Letters of Credit Work.

A letter of credit is a document from a financial institution that guarantees payment to a seller for goods or services provided to a buyer. The letter of credit gives the seller a level of protection against nonpayment by the buyer. In essence, the issuing bank is saying that it will stand behind the buyer’s … Read more

What Is a Credit Limit?

A credit limit is the maximum amount of credit that a financial institution will extend to a borrower. It is also the maximum amount that a borrower is allowed to spend using a credit card or other form of borrowing. Credit limits are typically set by the lender and may be based on the borrower’s … Read more

Credit Agreement Definition.

A credit agreement is a legal document between a lender and a borrower that outlines the terms of a loan. The agreement includes information such as the amount of the loan, the interest rate, the repayment schedule, and any collateral that is being used to secure the loan. What makes a credit agreement void? There … Read more

Utilization Fee.

A utilization fee is a fee charged by a lender for the use of borrowed funds. The fee is typically a percentage of the amount borrowed and is paid upfront when the loan is taken out. Utilization fees are common with business loans and lines of credit. Does high utilization hurt credit score? There is … Read more

Debit Balance.

A debit balance is the amount of money owed by a customer to a business. This can be the result of a customer not paying for goods or services rendered, or it can be the result of a business not providing goods or services that were paid for in advance. A debit balance may also … Read more