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Loan and credit glossary
The words you meet when you borrow, explained in a line or two. Tap a link for the full guide.
A
- Account Aggregator (AA)
- An RBI-licensed NBFC that moves your financial data, such as bank statements, from your bank to a lender only with your consent, encrypted. It cannot read or store the data. Account Aggregator explained →
- Amortisation schedule
- A table showing, for every EMI, how much goes to interest, how much to principal and what remains outstanding. How EMI is calculated →
- Annual Percentage Rate (APR)
- The all-in yearly cost of a loan, including interest and fees, shown in the Key Fact Statement. The fairest number to compare loan offers on. Key Fact Statement →
- Average bank balance (ABB)
- The average of your account balance over a period or on set dates each month, used by lenders to judge whether you can carry an EMI. What lenders check in your bank statement →
B
- Balance transfer
- Moving the outstanding amount of a loan to a new lender, usually for a lower rate or better terms. Top-up loan and balance transfer →
- Bounce
- A failed EMI auto-debit or a returned cheque because of insufficient funds or another reason. Bounces attract charges and weigh against you in loan decisions.
- Bullet repayment
- Repaying the principal in one go at the end of the tenure, with interest paid along the way or at the end — common in some gold loans.
C
- Cash credit (CC)
- A working capital limit for businesses, usually backed by stock and receivables; interest is charged only on the amount used. Working capital vs term loan →
- CGTMSE
- Credit Guarantee Fund Trust for Micro and Small Enterprises — guarantees part of collateral-free loans to micro and small enterprises, up to ₹10 crore from April 2025. CGTMSE explained →
- CIBIL MSME Rank (CMR)
- A rank from CMR-1 (least risky) to CMR-10 (most risky) for businesses with credit exposure up to ₹50 crore. Business credit score →
- CIBIL score
- A three-digit credit score from 300 to 900 by TransUnion CIBIL, based on your credit history. The everyday name for credit scores in India. How to improve your CIBIL score →
- Co-applicant
- A person who applies for a loan together with the main borrower and is equally responsible for repaying it. Co-applicant vs guarantor →
- Collateral
- An asset — property, gold, a vehicle, a deposit — pledged to secure a loan, which the lender can sell if the loan isn't repaid. Secured vs unsecured loans →
- Cooling-off period
- For digital loans, a period after disbursal during which you can exit by repaying the principal and proportionate APR without a penalty. RBI digital lending rules →
- Credit bureau (CIC)
- A credit information company that keeps credit records and scores. India has four: TransUnion CIBIL, Experian, Equifax and CRIF High Mark.
- Credit utilisation
- How much of your credit card limit you use. Keeping it below about 30% helps your credit score.
D
- Days past due (DPD)
- How many days late a payment was in a month, as shown in your credit report. 000 means paid on time. DPD, NPA and settlement explained →
- Debt consolidation
- Replacing several debts, often costly card balances, with a single loan and one EMI. Debt consolidation loan →
- Disbursal
- When the lender pays the loan amount out — under RBI rules for digital loans, directly into the borrower's bank account.
E
- EMI
- Equated monthly instalment — the fixed amount paid every month to repay a loan, made up of interest and principal. EMI calculator →
- External benchmark lending rate (EBLR)
- A floating loan rate linked to an external benchmark such as the RBI's repo rate, plus a spread. Repo rate and your EMI →
F
- Fixed rate
- An interest rate that stays the same for the whole tenure. Most personal loans are fixed-rate.
- Flat rate
- Interest charged on the full original loan amount for the whole tenure. It costs more than a reducing rate of the same number. Flat to reducing rate calculator →
- Floating rate
- An interest rate that changes with a benchmark, at set reset dates.
- FOIR
- Fixed obligations to income ratio — all your EMIs as a share of monthly income. Lenders use it to judge affordability. Loan eligibility calculator →
- Foreclosure
- Repaying the whole outstanding loan before the end of its tenure and closing it. Prepayment and foreclosure →
G
- Grievance redressal officer
- The person a lender or loan platform names to handle complaints. If not resolved in 30 days, you can approach the RBI Ombudsman. Our grievance redressal →
- Guarantor
- A person who promises to repay a loan if the borrower doesn't. Co-applicant vs guarantor →
H
- Hard enquiry
- A check of your credit report by a lender because you applied for credit. Many in a short time can lower your score.
- Hypothecation
- Securing a loan against a movable asset, such as a vehicle or machine, that stays with you while the loan runs.
K
- Key Fact Statement (KFS)
- A standardised summary of a loan's terms — APR, fees, EMIs and grievance details — that lenders must give before you sign. Key Fact Statement explained →
- KYC
- Know Your Customer — verifying your identity and address, usually with PAN and Aadhaar or another officially valid document.
L
- Lending Service Provider (LSP)
- A company that helps a bank or NBFC with sourcing, onboarding or servicing loans. A loan facilitation platform is an LSP. RBI digital lending rules →
M
- Moratorium
- A period during which loan repayments are paused or reduced, as agreed with the lender. Interest usually keeps adding up.
- Mudra loan
- A loan under the PM Mudra Yojana for micro and small non-farm businesses, up to ₹20 lakh in the Shishu, Kishore, Tarun and Tarun Plus categories. Mudra loan explained →
N
- NACH / e-mandate
- An instruction that lets the lender debit your EMI from your bank account automatically on the due date.
- NBFC
- Non-banking financial company — an RBI-registered company that lends but cannot offer savings or current accounts. NBFC vs bank →
- No Objection Certificate (NOC)
- A letter from the lender confirming the loan is fully repaid and it has no further claim.
- Non-performing asset (NPA)
- A loan on which interest or principal has been overdue for more than 90 days, generally. DPD, NPA and settlement explained →
O
- Overdraft (OD)
- A limit on a current account that lets you withdraw more than your balance; interest is charged only on what you use.
P
- Part-prepayment
- Paying a lump sum on top of your EMIs to reduce the outstanding principal, then lowering either the EMI or the tenure. Loan prepayment calculator →
- Principal
- The amount borrowed, or the part of it still outstanding, on which interest is charged.
- Processing fee
- A one-time fee a lender charges for processing a loan, usually a percentage of the amount, plus GST.
R
- Reducing-balance rate
- Interest charged only on the amount still outstanding each month. Standard for most bank and NBFC loans. Flat vs reducing rate →
- Repo rate
- The rate at which the RBI lends short-term money to banks; changes in it flow into floating loan rates linked to it. Repo rate and your EMI →
S
- Sanction letter
- The lender's letter approving your loan, with the amount, rate, tenure and conditions.
- Secured loan
- A loan backed by collateral, such as a home loan, gold loan or loan against property. Secured vs unsecured loans →
- Settled account
- A loan closed after the lender accepted less than the full amount. It is reported as 'settled' and hurts your credit for years. DPD, NPA and settlement explained →
T
- Tenure
- The length of time over which a loan is repaid, usually in months.
- Top-up loan
- An additional loan from your existing lender over a loan you are already repaying. Top-up loan and balance transfer →
U
- Udyam registration
- The free government registration for micro, small and medium enterprises, giving an MSME certificate. Udyam registration →
- Unsecured loan
- A loan without collateral, given on the strength of income and credit record — such as a personal loan. Unsecured business loan →
W
- Working capital
- The money tied up in running a business day to day — stock, receivables and payables. Working capital loan →
- Written-off account
- A loan the lender has removed from its books as unlikely to be recovered. The debt still exists and is a major negative on your report.
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