Earnest Personal Loans Glossary

The A–C group covers the cost and credit basics, including APR, amortization, autopay discounts and the credit report items lenders review before they decide on a personal loan request.

Adverse action notice

An adverse action notice is the letter or email a lender must send when it declines your application or offers worse terms than you asked for. It lists the main reasons, such as a high debt-to-income ratio or a recent late payment, and names the credit bureau it used. Reading it carefully tells you exactly what to fix before you look at earnest personal loans or any other personal loan again.

Amortization

Amortization is the schedule that spreads a loan's principal and interest across equal monthly payments. Early payments go mostly toward interest, and later payments go mostly toward principal, because interest is charged on a balance that keeps shrinking. A personal loan calculator shows this split month by month.

Annual percentage rate (APR)

The APR is the yearly cost of borrowing, including interest and certain fees such as an origination fee, expressed as a percentage. It is the best single number for comparing earnest personal loans offers because it folds those fees into one rate. Lenders in our network quote a representative APR range of 5.99% to 35.99%, and some lenders in some states may charge more.

Autopay discount

An autopay discount is a small APR reduction, often around 0.25 to 0.50 percentage points, that some lenders give when you set up automatic monthly payments from your checking account. It lowers your cost slightly and helps you avoid missed payments. If you later turn autopay off, the lender may remove the discount.

Balance transfer

A balance transfer moves debt from one credit card to another, often to take advantage of a low or 0% introductory rate. Transfer fees of about 3% to 5% of the amount are common, and the rate usually jumps when the intro period ends. Some people compare a balance transfer with a fixed-payment personal loan before deciding how to pay down cards.

Co-signer

A co-signer is a second person who signs the loan agreement and becomes equally responsible for repaying it. Adding a co-signer with stronger credit or income can help some borrowers qualify for a personal loan or receive a lower APR. Not every lender allows co-signers, and a missed payment hurts both people's credit.

Collections

An account goes to collections when the original creditor gives up trying to collect and passes or sells the debt to a collection agency. A collection account can stay on your credit report for up to seven years and makes lenders more cautious. Paying or settling it does not erase the record, though newer scoring models may weigh paid collections less.

Credit inquiry, hard

A hard inquiry happens when a lender pulls your full credit report to make a final lending decision, usually after you accept an offer and continue. It can lower your score by a few points for a while and stays on your report for about two years. Several hard inquiries in a short window can make lenders hesitant, so space out requests for earnest personal loans.

Credit inquiry, soft

A soft inquiry is a limited credit check that does not affect your credit score and is not visible to other lenders. Many lenders use a soft inquiry to decide whether to show you an offer. Checking your own credit before you compare earnest personal loans also counts as a soft inquiry.

Credit report

A credit report is the record a credit bureau keeps of your accounts, balances, payment history, collections and inquiries. Lenders read it alongside your score to understand how you have handled debt. You can request free reports from each of the three major bureaus and dispute any errors you find.

Credit score

A credit score is a three-digit number, usually between 300 and 850, that summarizes the risk shown on your credit report. Payment history and the amount you owe relative to your limits carry the most weight. A higher score generally means more lender choices and a lower APR when you compare earnest personal loans.

Credit utilization

Credit utilization is the share of your available card limits that you are currently using. If you owe $1,500 on cards with a combined $5,000 limit, your utilization is 30%. Keeping it under about 30%, and lower if possible, tends to support a healthier score.

The D–F group explains how lenders measure your existing debt, what happens when payments stop, and the steps between a lender's approval and the moment personal loan money reaches your account.

Debt consolidation

Debt consolidation means using one new loan to pay off several existing balances, such as credit cards, so you make a single fixed payment. A consolidation personal loan saves money only when the new APR and fees are lower than what you pay now and you avoid running the cards back up. A longer term can lower the payment but raise total interest.

Debt-to-income ratio (DTI)

Your DTI is your total monthly debt payments divided by your gross monthly income. Someone paying $1,400 a month in debts on $3,800 of gross income has a DTI of about 36.8%. Many lenders prefer a DTI under roughly 36% to 40% when they review a personal loan, and our eligibility requirements page shows how a new payment changes the ratio.

Default

A loan is in default when you have missed payments for long enough that the lender considers the agreement broken, often after 90 to 120 days, depending on the lender and state. Default can lead to collections, a serious mark on your credit report and possible legal action. Contacting the lender early about a hardship plan can often prevent it.

Deferment

Deferment is a lender-approved pause on payments for a short period, usually because of a hardship. Interest may keep building during the pause, which raises your total cost. Lenders behind earnest personal loans offer deferment less often than student loan servicers, so ask before you assume it is available.

Electronic signature

An electronic signature is the legally binding way you sign a loan agreement online, by typing your name, clicking a box or drawing a signature. It carries the same weight as signing on paper. Read the full agreement for any of the earnest personal loans offers you accept and save a copy before you sign.

Fixed rate

A fixed rate stays the same for the whole loan term, so your monthly payment never changes. Most installment personal loans in the $500 to $5,000 range use a fixed rate, which is why people comparing earnest personal loans usually see one steady payment. That predictability makes budgeting easier than with a variable rate.

Funding

Funding is the moment the lender sends approved personal loan money to your checking account. With many lenders in our network, funding can happen as soon as the next business day after approval, depending on the lender. Bank processing, weekends and holidays can add a day or two.

The G–L group defines income terms lenders use, how interest and fees work during repayment, and what the lender network behind a single request form means for borrowers.

Grace period

A grace period is the time after a due date during which a payment can arrive without a late fee, often about 10 to 15 days, depending on the lender. Interest usually still accrues during that time. Not every personal loan includes a grace period, so check the agreement before you accept one of the earnest personal loans offers you receive.

Gross monthly income

Gross monthly income is what you earn each month before taxes and deductions. Lenders use it, rather than take-home pay, to calculate your debt-to-income ratio for a personal loan. If your pay varies, lenders may average several months of deposits.

Hardship plan

A hardship plan is a temporary arrangement a personal loan lender may offer if job loss, illness or another setback makes your normal payment hard to afford. It might lower your payment, move a due date or pause payments for a short period. Asking before you miss a payment gives you the best chance of approval.

Installment loan

An installment loan is borrowed as one lump sum and repaid in equal scheduled payments over a set term. Most personal loans are installment loans, unlike credit cards or lines of credit, which let you borrow repeatedly. You know your payment and payoff date from day one.

Interest

Interest is the price a lender charges for letting you use its money, calculated as a percentage of the balance you still owe. In our representative example, $269.44 of the $2,269.44 you repay is interest. A lower rate or shorter term reduces total interest, which is why readers checking earnest interest rates also compare terms.

ITIN

An Individual Taxpayer Identification Number, or ITIN, is a tax number the IRS issues to people who cannot get a Social Security number. Some lenders accept an ITIN on a personal loan application, while others require an SSN. Check each lender's requirements before you apply.

Late fee

A late fee is a charge added when a payment arrives after the due date or grace period. It may be a flat amount, such as $15 to $40, or a percentage of the payment, and some states cap it. A payment 30 days or more past due can also be reported to the credit bureaus.

Lender network

A lender network is the group of independent lenders that receive requests submitted through one connector service like ours. Each lender reviews your details, decides whether to make an offer and sets its own terms. People who search for earnest personal loans and use our form are matched with lenders in this network, not with a single company.

Loan agreement

The loan agreement is the full contract between you and the lender, covering the amount, APR, payment schedule, fees, default terms and your rights. It includes the promissory note and the federal cost disclosures. Keep a copy until the personal loan is fully repaid.

Loan term

The loan term is how long you have to repay, usually stated in months. Personal loans in our network typically run 6 to 60 months, depending on the lender and amount. A longer term lowers the monthly payment but usually raises total interest on earnest personal loans and every other installment loan.

The M–P group covers the monthly payment, the fees that can shrink the money you receive, and the early steps such as prequalification that shape the earnest personal loan rates a lender quotes you.

Military Lending Act

The Military Lending Act is a federal law that protects active-duty service members and their dependents. It caps the cost of most consumer loans at a 36% military annual percentage rate, which includes most fees, and bans certain contract terms. Lenders adjust the personal loans they offer to covered borrowers.

Minimum payment

A minimum payment is the smallest amount a credit card issuer accepts each month to keep the account in good standing. Paying only the minimum keeps most of the balance on the card, so interest keeps building for years. A fixed personal loan payment, by contrast, pays off the whole balance by a set date.

Monthly payment

The monthly payment is the fixed amount you owe each month on an installment loan, covering both interest and principal. In our representative example, borrowing $2,000 over 12 months at 24.00% APR means 12 monthly payments of $189.12. Lenders compare this payment with your income to judge whether a personal loan is affordable.

Net funding

Net funding is the amount actually deposited in your account after any origination fee is subtracted. With a 5% fee on a $2,000 loan, $100 is deducted and your net funding is $1,900, while you still repay the full $2,000 plus interest. If you need a specific amount in hand from earnest personal loans, request enough to cover the fee.

Origination fee

An origination fee is a one-time charge, often 0% to 10% of the loan amount, that some lenders take to process a loan. It is usually deducted from your funds and included in the APR. Comparing APRs, rather than interest rates alone, captures this fee, and readers checking earnest personal loan rates should look at the APR for that reason.

Prepayment penalty

A prepayment penalty is a fee some lenders charge if you pay off a loan early. Many personal loan lenders do not charge one, which lets you save interest by paying ahead. Look for the word "prepayment" in the agreement before you sign.

Prequalification

Prequalification is a lender's early estimate of whether you might qualify and at what rate, usually based on a soft credit inquiry. It does not affect your score, but it is not a final approval. Final personal loan terms can change after the lender verifies your income and identity.

Principal

Principal is the amount you borrow, before interest. In our representative example, the principal is $2,000. Each personal loan payment reduces the principal a little, and extra payments applied to principal shorten the loan.

Promissory note

A promissory note is your written promise to repay the loan on the stated terms. It is usually part of the loan agreement you sign electronically. Once signed, it is legally binding.

The Q–S group explains state rate caps, how a representative example is built, the fee for a returned payment, and the difference between secured and unsecured borrowing.

Rate cap

A rate cap is a legal maximum on the interest or APR a lender may charge, set by a state or by federal law for certain borrowers. Several states cap rates on smaller installment loans, so lenders that price above the cap do not operate there. People searching for earnest interest rates in different states can see quite different offers for this reason.

Representative example

A representative example shows what a typical loan might cost using one set of assumptions. Ours is: borrowing $2,000 over 12 months at 24.00% APR = 12 monthly payments of $189.12, total repaid $2,269.44, total interest $269.44 (estimate, no origination fee assumed). Your own offer for earnest personal loans will differ based on your profile, the lender and your state.

Returned payment fee

A returned payment fee, sometimes called an NSF fee, is charged when an automatic payment bounces because your account lacks funds. Your bank may charge its own fee too, so one bounced payment can cost twice. Keeping a small buffer in checking around the due date helps avoid it.

Secured loan

A secured loan is backed by collateral, such as a car or savings account, that the lender can take if you stop paying. Collateral can mean a lower rate or easier approval than an unsecured personal loan. The personal loans in our network are generally unsecured.

Simple interest

Simple interest is charged only on the principal balance you still owe, not on previously charged interest. Most installment personal loans use simple interest calculated daily or monthly. Paying a personal loan early or paying extra reduces the balance and therefore the interest.

Statement balance

A statement balance is what you owed on a credit card when the billing cycle closed. Paying it in full by the due date usually avoids interest on new purchases. If you are consolidating cards with a personal loan, the payoff amount may differ slightly from the statement balance because of interest added since.

The T–Z group covers the total cost figures in your federal disclosures, the law that requires them, and the underwriting and verification steps that happen before a personal loan is funded.

Total cost of credit

The total cost of credit is everything you pay beyond the amount borrowed, including interest and fees, shown as the finance charge on your disclosure. In our representative example with no origination fee, the total cost of credit is $269.44. Comparing this dollar figure across offers is often clearer than comparing rates; our guide on how to read a loan offer walks through it line by line.

Total of payments

The total of payments is the sum of every scheduled payment over the life of the loan. In our representative example, it is $2,269.44. Readers who compare earnest personal loans reviews often mention that this single number made offers much easier to compare.

Truth in Lending Act (TILA)

The Truth in Lending Act is a federal law that requires lenders to disclose the APR, finance charge, amount financed and total of payments before you sign. Those standard disclosures let you compare personal loans side by side, whether you found them by searching earnest personal loans or through a bank. If an offer does not show them clearly, ask the lender for them.

Underwriting

Underwriting is the lender's review of your application to decide whether to approve it and on what terms. It typically weighs your credit report, income, debt-to-income ratio, bank history and state rules. We do not underwrite loans; each lender in our network does its own, and our rates guide explains how those factors move an APR.

Unsecured loan

An unsecured loan is not backed by collateral, so the lender relies on your credit and income to decide. Most personal loans from $500 to $5,000 are unsecured. Because the lender takes more risk, rates on an unsecured personal loan can be higher than on secured borrowing.

Variable rate

A variable rate can rise or fall over the life of the loan because it follows a benchmark index. Your payment can change as the rate moves. Credit cards and lines of credit often use variable rates, while most installment personal loans do not.

Verification

Verification is the step where a lender confirms the details you entered, such as your identity, income, address and bank account. For a personal loan, it may involve uploading pay stubs or ID, or connecting your bank account with your permission. Accurate details on your request help verification go quickly when you compare earnest personal loans.