Glossary of Payday Loans Terms

Amortization: the process of paying off a loan and the accrued interest over time in regular payments. Amortization allows the payment amount to remain the same each month, even though interest continues to accrue. Different portions of the payment are applied toward principal and interest each time, depending on how the interest is calculated.

Collateral: that which you must hand over if you default on a loan. Collateral is used to ensure you make all payments on the loan. If not, you lose whatever it is you put up for collateral.

Simple Interest: the process of portioning monthly payday loan payments between interest and principal. It is calculated based on your unpaid principal balance, the interest rate on your cash advance loan, and the number of days since your last payment.

Term: the period agreed upon in which the borrowed loan amount is to be repaid.