Loan and Rate Glossary: APR, Prime, Fed Funds, CPI and More

0–9

401(k) loan: Money you borrow from your own workplace retirement account and repay, with interest, through payroll deductions. IRS rules generally limit it to $50,000 or half your vested balance, whichever is less, and require repayment within five years unless the loan buys your main home. A loan you stop repaying is generally taxed as a distribution. More: Personal loan vs. 401(k) loan

A

Adverse action notice: The notice a lender must send when it turns down your application or offers worse terms than you asked for. Under the Equal Credit Opportunity Act it gives the reasons, or tells you how to ask for them, within 30 days of a completed application. More: How personal loan rates are set
Amortization: Paying off a loan in equal installments that cover the interest due and part of the principal each month. Early payments are mostly interest; later ones are mostly principal. At 12% over 36 months, a $10,000 loan has a payment of $332.14. More: How personal loan rates are set
Annual percentage rate (APR): The yearly cost of credit, including the interest rate and required fees such as an origination fee, stated as one percentage under the Truth in Lending Act. It is the number to compare between loan offers of the same term. More: How personal loan rates are set
Applicable federal rate (AFR): Minimum interest rates the IRS publishes every month in a revenue ruling, for short, mid and long terms. A family loan that charges less can be treated for tax purposes as if the lender had received interest at the AFR. More: Personal loan vs. family loan

B

Balance transfer: Moving a balance from one credit card to another, often to use a low promotional APR. Issuers usually charge a transfer fee, a percentage of the amount moved. More: Personal loan vs. balance transfer card
Basis point: One hundredth of a percentage point. A move from 3.75% to 4.00% is 25 basis points, or a quarter point. More: The federal funds rate and your loan
Buy now, pay later (BNPL): A short-term loan offered at checkout that splits a purchase into a few payments, often four payments over six weeks with no interest. Late fees and longer plans with interest exist, and the federal rules that apply depend on the product. More: Personal loan vs. buy now, pay later

C

Consumer Price Index (CPI): The Bureau of Labor Statistics' monthly measure of the prices consumers pay for a fixed basket of goods and services. In the 12 months through September 2026 it rose 3.7% (release of October 14, 2026). More: The CPI report and borrowing
Core inflation: Inflation measured without food and energy prices, which swing the most from month to month. Core CPI rose 2.6% in the 12 months through September 2026. More: The CPI report and borrowing
Cosigner: A second person who signs a loan and becomes legally responsible for repaying it if the borrower does not. The loan and any late payments usually appear on the cosigner's credit report too.
Cost of funds: What a lender pays for the money it lends: interest on deposits for a bank or credit union, or the return investors require from an online lender. It is the layer of a loan rate that follows the Fed and Treasury yields. More: How personal loan rates are set
Credit report: The record a credit bureau keeps of your accounts, balances, payment history and inquiries. Lenders read it, or a score built from it, when you apply, and you can dispute errors in it for free.
Credit score: A number calculated from your credit report that estimates how likely you are to repay. Lenders use scores to sort applicants into price groups, so the same loan can carry very different APRs for two borrowers.
Credit utilization: The share of your credit card limits that you are using, such as a $3,000 balance on $10,000 of limits (30%). Scoring models weigh it heavily, and moving card debt to an installment loan usually lowers it. More: Personal loan vs. credit card

D

Debt consolidation: Replacing several debts, often credit card balances, with one new loan and one monthly payment. It saves money only when the new APR and fees cost less than the old debts and the old accounts do not fill up again. More: Personal loan vs. credit card
Debt-to-income ratio (DTI): Your monthly debt payments, including the new loan, divided by your gross monthly income. A borrower paying $1,500 a month on $5,000 of income has a DTI of 30%; lenders use it to judge whether a new payment fits. More: How personal loan rates are set
Deferred interest: A promotion, common on store cards, where interest builds up during the offer and is charged back to the purchase date if the balance is not paid in full when the offer ends. It differs from a true 0% APR, which charges nothing for the promotional months. More: Personal loan vs. balance transfer card
Dot plot: A chart in the Fed's Summary of Economic Projections in which each policymaker marks, anonymously, where the federal funds rate should be at the end of each of the next few years. It is a set of views, not a promise. More: FOMC meetings explained

E

Earned wage access (EWA): A service that pays you part of wages you have already earned before payday, for a fee, a tip or through your employer. In a December 2025 advisory opinion, the CFPB said products that meet certain conditions are not credit under the Truth in Lending Act. More: Personal loan vs. cash advance apps
Employment Situation report: The Bureau of Labor Statistics' monthly jobs report, usually released on the first Friday of the month. It gives the change in nonfarm payrolls and the unemployment rate, and markets watch it for clues about the Fed. More: The jobs report and borrowing

F

Federal funds rate: The interest rate banks charge each other for overnight loans of reserves. The Federal Open Market Committee sets a target range for it: 3.75% to 4.00% since September 16, 2026, held on October 28, 2026. More: The federal funds rate and your loan
Federal Open Market Committee (FOMC): The Federal Reserve committee that sets the target range for the federal funds rate. It has twelve voting members and holds eight scheduled meetings a year; the last one of 2026 is on December 8–9. More: FOMC meetings explained
Finance charge: The dollar cost of credit under Regulation Z: interest plus fees you pay as a condition of getting the loan. A finance charge stated as a yearly rate is the APR. More: How personal loan rates are set
Fixed rate: An interest rate that stays the same for the life of the loan, so the monthly payment does not change. Most personal loans have fixed rates. More: The federal funds rate and your loan

G

G.19 Consumer Credit release: The Federal Reserve's monthly report on consumer credit outstanding, published around the fifth business day of each month. It also reports the average APRs commercial banks charge, including 11.90% on 24-month personal loans in the third quarter of 2026. More: The consumer credit report

H

Hard inquiry: A check of your credit report made when you apply for credit. It shows to other lenders and can lower a score by a few points for a while. More: Personal loan vs. credit card
Home equity: The part of your home's value you own outright: its market value minus what you still owe on it. Home equity loans and HELOCs let you borrow against it. More: Personal loan vs. HELOC
Home equity line of credit (HELOC): A revolving line of credit secured by your home. Most have variable rates tied to the prime rate, and the home can be lost if you do not repay. More: Personal loan vs. HELOC

I

Index: The published benchmark rate that a variable-rate loan follows, most often the prime rate for credit cards and HELOCs. Your rate is the index plus a margin. More: The prime rate explained
Installment loan: A loan paid out once as a lump sum and repaid in a fixed number of scheduled payments. Personal loans, auto loans and mortgages are installment loans. More: Personal loan vs. line of credit
Interest on reserve balances (IORB): The rate the Federal Reserve pays banks on money they keep in their reserve accounts, one of the tools that holds the federal funds rate inside its target range. It has been 3.90% since October 29, 2026. More: The federal funds rate and your loan

L

Loan term: The length of time you have to repay a loan, such as 36 or 60 months. A longer term lowers the monthly payment but usually raises the total interest you pay. More: How personal loan rates are set

M

Margin: The fixed number of percentage points a lender adds to an index to set a variable rate. A card priced at prime plus 15 points charges 22% when prime is 7.00%. More: The prime rate explained

O

Origination fee: A one-time charge for making a loan, usually a percentage of the amount, often taken out of the money before you receive it. It is part of the APR: 12% interest with a 5% fee over 36 months works out to an APR of about 15.6%. More: How personal loan rates are set

P

Payday alternative loan (PAL): A small-dollar, short-term loan that federal credit unions can make to their members under NCUA rules, as an alternative to payday loans. NCUA allows a rate of up to 28% on these loans, above the general ceiling for federal credit unions. More: Personal loan vs. credit union PAL
Prepayment penalty: A fee for paying off a loan early. Many personal loans have none, but check the loan agreement before you plan to refinance or pay ahead. More: Refinancing a personal loan
Prequalification: A lender's early estimate of the rate and amount you might get, usually based on a soft inquiry. It is not an approval, and the final APR can differ after a full application. More: How personal loan rates are set
Prime rate: The base rate banks use to price many variable-rate loans and credit cards. Large banks set it at the top of the federal funds target range plus three points: 7.00% since the September 2026 increase. More: The prime rate explained
Promotional APR: A temporary low rate, often 0%, on purchases or balance transfers. When it ends, the regular APR applies to any balance left. More: Personal loan vs. balance transfer card

R

Real interest rate: An interest rate minus inflation, which shows what borrowing costs in purchasing power. A 12% APR with 3.7% inflation is a real rate of roughly 8.3%. More: Inflation and the real cost of borrowing
Recession: A significant decline in economic activity that spreads across the economy and lasts more than a few months. In the United States, the dates are set after the fact by the National Bureau of Economic Research's Business Cycle Dating Committee. More: Recessions and borrowing
Refinancing: Replacing a loan with a new one, usually to get a lower APR, a different term or a different payment. It pays only if the savings exceed any new fees. More: Refinancing a personal loan
Revolving credit: Credit you can borrow, repay and borrow again up to a limit, such as a credit card or a line of credit. The payment changes with the balance, and there is no set payoff date. More: Personal loan vs. line of credit
Right of rescission: Your right under Regulation Z to cancel certain loans secured by your main home, such as a HELOC, until midnight of the third business day after the account is opened or you receive the required notice and disclosures, whichever is later. It does not apply to a mortgage used to buy the home. More: Personal loan vs. HELOC
Risk-based pricing: Charging different borrowers different rates based on how likely they are to repay. A lender that gives you worse terms based on your credit report must send a risk-based pricing notice or a free credit score disclosure. More: How personal loan rates are set

S

Secured loan: A loan backed by something the lender can take if you do not repay, such as a car, a home or a savings account. Security usually lowers the rate and raises what you can lose. More: Personal loan vs. HELOC
Senior Loan Officer Opinion Survey (SLOOS): A quarterly Federal Reserve survey asking banks whether they have tightened or eased lending standards and how demand for loans has changed, including for credit cards and other consumer loans. More: Bank lending standards
Soft inquiry: A credit check that does not affect your credit score, such as a prequalification check or a look at your own report. Other lenders do not see it.
Summary of Economic Projections (SEP): Forecasts of growth, unemployment, inflation and the federal funds rate from each Fed policymaker, published after four of the eight FOMC meetings each year, including December 8–9, 2026. More: FOMC meetings explained

T

Treasury yield: The annual return investors earn on U.S. government debt. The 10-year yield was 4.88% on November 9, 2026, and lenders watch it as a gauge of longer-term borrowing costs. More: Treasury yields and loan rates

U

Unsecured loan: A loan backed only by your promise to repay, with no collateral. Most personal loans are unsecured, which is one reason their rates sit well above the prime rate. More: Average personal loan rates

V

Variable rate: An interest rate that can change over time because it is tied to an index such as the prime rate. Most credit cards and HELOCs have variable rates, so their payments can rise after a Fed increase. More: The prime rate explained

Y

Yield curve: A line connecting Treasury yields from short to long maturities. When short-term yields sit above long-term ones, the curve is called inverted, a pattern markets watch as a possible warning of a slowdown. More: Treasury yields and loan rates