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Lending Lingo

Amortization: A period in which a debt is reduced or paid off by regular payments.
 
Collateral: Something pledged as security for repayment of a loan, to be forfeited in the event of a default.
 
Default: Failure to repay a loan according to the terms agreed upon.
 
Equity: The difference between the fair market value of a property and the current indebtedness secured on the property.
 
Fair Market Value: The amount a property would sell for on the open market. 
 
Interest: The amount paid to borrow money.
 
Personal loan: A loan where money is borrowed and paid back in fixed monthly payments in a relatively short amount of time, generally 6 months to 5 years.
 
Principal: The amount of debt, exclusive of interest, remaining on the loan.

Second Mortgage: A loan that uses the equity in your home as collateral.