Accrued Interest
Measure representing the amount of interest accrued on a loan or investment from the last interest payment date to the present. This amount reflects interest that has been accrued but not yet paid or capitalised.
Advanced Interest
Interest that is calculated and paid in advance, i.e. before the utilisation period of the loan or the investment period. In general, the total amount of interest is calculated at the start of the loan and is paid together with the principal amount when the loan is granted.
Affordability Calculation
Proportion of family income allocated to loan payments, including the new mortgage commitment. This is measured as a percentage. It should not, as a rule, exceed 40% of one twelfth of gross family income and 35% of one twelfth of net family income, for customers of foreign nationality living abroad and who apply for home loans (Live in Portugal).
Amortisation
The process of gradually paying off a loan over time. When a borrower makes regular payments towards their loan, one part of the payment is intended to cover the principal amount of the loan, while the other part is intended to pay the accrued interest. As time goes by, the proportion of the payment going towards the principal increases, while the proportion going towards interest decreases. Amortisation is crucial in order to pay off the loan in full within the agreed timeframe. It is a key process in credit management and helps borrowers build equity as they reduce the loan balance.
Annual Percentage Rate (APR)
This rate translates all of the costs associated with the loan such as charges for valuation, interest, insurance (life and building and contents insurance) and other costs payable to the bank by the customer.
Annual Percentage Rate Revised (APRR)
This differs from APR to the extent that it also includes the tax associated with a loan and solely refers to consumer credit.
Attachment
A legal measure involving the seizure of a debtor’s property or assets as security or payment of a debt. This measure is often applied by courts or creditors when a debtor fails to fulfil their payment duties, such as in the case of an unpaid loan, credit card debt or unfulfilled financial obligations.
Capital
Amount of money or financial assets that a person, company or institution owns and is available for investment, spending or to cover expenses. It can include money in a bank account, investments in shares, property, vehicles, among others. Capital is crucial for financing business operations, investments, as well as personal projects. In relation to mortgage loans, capital can be the amount the borrower invests in buying a house as a down payment, or the amount of the outstanding loan that has not yet been paid off.
Capital Grace Period
Period defined in a loan during which the borrower makes payments that cover only the interest, without reducing the principal amount of the loan. This results in lower monthly instalments during the grace period, but increases the total cost of the loan.
Capitalisation
The process by which interest earned or accumulated on an investment or loan is added to the principal amount (the original amount) and, from that moment on, earns interest on interest. This results in the total amount growing exponentially over time.
Compound Interest
Interest calculated not only on the principal amount, but also on previously accrued interest. This leads to exponential growth in savings or debt over time, depending on whether it’s earned or owed.
Consumer Credit
Loans granted to individuals to finance personal expenses such as the purchase of consumer goods, travel, education or other non-housing-related needs.
Credit
Fund lent to an individual by a financial institution or creditor, with the requirement to repay the amount lent with interest within a specified period of time.
Credit Institution
Authorised and regulated financial entity that offers a variety of financial services, including loans, credit, deposits, banking services and other related products.
Credit Risk
Probability of a borrower failing to fulfil their payment duties on a loan or debt, resulting in financial losses for the lender or creditor.
Credit Transfer
Financial process by which a borrower transfers their existing loan from one financial institution to another, often to secure better conditions or consolidate debt.
Debtor
Individual, company or entity that has received a loan or credit and is obligated to repay it according to the agreement’s terms.
Default
Occurs when a borrower fails to meet the payment obligations set out in a loan agreement. May lead to penalties, additional charges, and legal action.
Default Interest
Additional interest applied when a borrower misses a scheduled payment. Serves as a penalty and compensates the lender for the delay or missed payment.
Deferred Interest
Interest that accrues over a period and is payable at the end or on specified dates. Common in mortgages and long-term loans.
Deposit
Amount paid by the purchaser to the vendor as a sign of intent to buy and part of the total purchase price, often used in real estate transactions.
Disbursement dDate
The date on which loan funds are released to the borrower. It marks the start of the loan term.
Effective Interest Rate
True cost of borrowing or return on investment, reflecting compounding and all associated fees. It provides a more accurate picture than nominal rates.
Effort Rate
The percentage of a borrower’s income allocated to loan repayments. Used by lenders to assess a borrower’s capacity to repay.
Encumbrance
A legal claim or liability attached to property, such as a mortgage or easement, that can restrict its use or transfer.
European Central Bank (ECB)
Institution responsible for Eurozone monetary policy. It regulates inflation, supervises banks, and ensures financial stability across member countries.
Euribor
European interbank offered rate – the average interest rate at which European banks lend to each other. Frequently used as a benchmark in adjustable-rate loans.
Expenses
All costs associated with a loan beyond the principal amount – including interest, administrative fees, taxes, and insurance premiums.
Financial Assets
Instruments with economic value that can be traded, including stocks, bonds, mutual funds, and more. Key for investment strategies and wealth accumulation.
Fixed Rate
A constant interest rate over the life of a loan or investment, ensuring predictable payments.
Grace Period
A temporary time-frame where loan repayments are deferred or reduced.
Guarantor
A person/entity who commits to repay a debt if the main borrower defaults.
GAPR (Global Annual Percentage Rate)
Total annual loan cost, including interest and all associated charges.
GNAR (Gross Nominal Annual Rate):
Base interest rate before considering compounding or additional costs.
Housing Credit
Long-term loan for buying residential property, secured by the property itself.
Indexation
Periodic adjustment of interest rates or values based on a reference index.
Index
Reference indicator (e.g., EURIBOR) for setting financial rates.
Interest
The cost of borrowing money or the return on investment.
Instalment
Regular loan repayment covering part of the principal and interest.
Interest Rate
The percentage charged for borrowing or earned from investing.
Index-linked rate
Interest rate tied to a reference index, subject to variation..
Loan Agreement
Legal contract outlining the terms of a loan between borrower and lender.
Lender
The entity providing a loan with the expectation of repayment plus interest.
Loan
A financial arrangement where funds are borrowed and repaid with interest.
Loan Term
Duration from loan issuance to final repayment.
Mortgage Credit
Loan for property purchase using the property as collateral.
Mortgage Extinction
Certificate confirming a mortgage has been fully repaid.
Mortgage
Loan secured by real estate property.
Mortgage Credit Institution
Entity specialising in issuing property-backed loans.
Mortgage Spread
The lender’s profit margin on a mortgage loan.
Maximum Financing Amount
Highest loan amount a financial institution is willing to provide.
New Home Mortgage Loan
Loan for buying a never-before-occupied property.
NARR (Nominal Annual Net Rate)
Net interest rate after fees but before taxes.
Nominal Interest Rate
Interest rate excluding additional charges or compounding.
Overdue Credit
Loan payment not made by its due date.
Own Permanent Dwelling
A primary residence occupied continuously by the owner.
Optional Associated Sales
Extra, non-mandatory products offered alongside a loan.
Principal and Interest Shortfall
Period during which payments are suspended and unpaid interest is added to the principal.
Promotional Rate
Temporarily lowered interest rate to attract borrowers.
Renegotiated Credit
Revised loan terms to better suit borrower circumstances.
Revolving Credit
Flexible borrowing arrangement with a reusable credit limit.
Repayment
The act of paying back a debt per agreed terms.
RAER (Revised Annual Effective Rate)
Comprehensive cost of credit including interest capitalisation and all fees.
Shares
Tradable assets representing ownership in a company, giving rights to profits and residual value.
Simple Interest Rate
Interest calculated solely on the original principal.
Variable Rate
Interest rate that can be adjusted by the lender, not necessarily tied to an index.
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