Letter of refusal of credit: a letter from the Office of Loan Programs denying a loan to a particular person. The reasons for this refusal may be credit history, lack of verifiable liquid assets, insufficient income, etc. Before lending money to someone or providing services without payment, it is important to know if you need a credit contract to protect yourself. You never really want to borrow money, goods or services without a credit contract, to make sure you`re reimbursed or that you can take legal action to get your money back. The purpose of a loan agreement is to describe in detail what is loaned and when the borrower must repay it and how. The loan agreement contains specific conditions that describe precisely what is given and what is expected in return. Once it has been executed, it is essentially a promise to pay by the lender to the borrower. Closing costs – Costs incurred by borrowers and sellers when entering into a credit transaction. Included are original fees, inspections, title insurance, valuations, legal and brokerage fees, as well as other fees related to the purchase of a loan. Compensation Balance – A minimum account balance that a borrower must maintain as a precondition for obtaining a loan. It increases the effective interest rate on the loan. Credit guarantee: an option that a lender has made available to a borrower to later change the terms of credit. For example, when lending, a lender may offer a borrower the option of switching from a variable-rate loan to a fixed income loan.
Typically, the lender charges the borrower a fee for this option. “Investment banks” establish loan contracts that meet the needs of the investors they want to attract funds; “Investors” are still highly developed and accredited organizations that are not subject to bank supervision and the need to respect public trust. Investment banking activities are overseen by the SEC and the focus is on whether the parties providing the funds are properly or properly disclosed. Advance Authorization: A Pre-Authorization Certificate issued by the Office of Loan Programs, which indicates that a borrower`s loans, assets and income have been verified and that the applicant is qualified for a program loan at a specified amount and interest rate. At the time of pre-approval, the initial interest rate indicated is not “blocked” and can therefore be changed prior to the issuance of a loan letter of commitment. The initial interest rate is the program rate applicable at the time a loan commitment is issued. Risk Assessment – The relative amount of credit risk associated with a credit transaction. The lender may apply credit or risk assessment procedures to assess credit applications and classify borrowers into different categories of risk for the purposes of credit acceptance or denial, credit prices, credit control, level of supervision and level of credit documentation.
Mortgage: a lender or creditor who holds a mortgage or letter of trust. Borrowing is an important obligation, regardless of the amount, which is why it is important to protect both parties through a loan agreement. A loan agreement not only describes the terms of the loan, but also serves as evidence that money, goods or services were not a gift to the borrower. This is important because it prevents someone from getting out of the refund by claiming it, but it can also help you make sure it`s not a problem with the IRS afterwards. Even if you think you may not need a credit contract with a friend or family member, it`s still a good idea to have this in place just to make sure there`s no problem or disagreement about the terms later that could ruin a valuable relationship.