Financial Glossary
Short, plain-language definitions for common financial terms used across Savora Finance guides and calculators.
A
- Adjustable-Rate Mortgage (ARM)
- A home loan with an interest rate that can change after an initial fixed period.
- Affordability Buffer
- Extra margin between expected payment and maximum affordable payment.
- Amortization
- Amortization describes paying down a loan over time through scheduled payments.
- Annual Fee
- A yearly charge for holding a credit card or financial product.
- APR
- Annual percentage rate shows the yearly cost of borrowing before compounding and certain costs may be considered.
- APR Spread
- The difference between two borrowing rates.
- APY
- Annual percentage yield shows how much a savings product may earn in one year after compounding is included.
B
- Balance Transfer
- Moving debt from one credit account to another, often to pursue a lower promotional rate.
- Balloon Risk
- Risk from a large payment due at the end of a loan term.
- Billable Hours
- Hours a freelancer or business can charge to a client.
- Bridge Savings
- Savings used to cover a gap between income sources.
- Brokerage Account
- An account used to buy and sell investments such as stocks, bonds, ETFs, and mutual funds.
- Budget Variance
- The difference between planned and actual spending.
- Buy Now Pay Later
- A short-term financing method that splits purchases into installments.
C
- Cash Flow
- The money coming in and going out over a period of time.
- Cash Flow Margin
- How much money remains after expenses and required payments.
- Cash Reserve
- Money kept available for emergencies, upcoming expenses, or liquidity needs.
- Cash-on-Cash Return
- A real estate return measure based on cash invested.
- Certificate of Deposit (CD)
- A deposit account that usually pays a fixed rate for a set term.
- Closing Cost Credit
- A seller or lender credit that reduces cash needed at closing.
- Compound Interest
- Interest earned on both the original amount and prior interest.
- Contribution Rate
- The share of income contributed to savings or retirement.
- Credit Builder Loan
- A small installment loan designed to help establish payment history.
- Credit Limit
- The maximum amount a lender allows you to borrow on a credit account.
- Credit Report
- A record of borrowing and repayment information compiled by credit bureaus.
- Credit Score
- A numeric estimate of credit risk based on credit report information.
- Credit Utilization
- Credit utilization compares revolving credit balances with available credit limits.
D
- Debt Avalanche
- A payoff method that targets the highest-interest debt first.
- Debt Service
- Total required debt payments over a period, often monthly or annually.
- Debt Snowball
- A payoff method that targets the smallest balance first.
- Debt-to-Income Ratio
- Debt-to-income ratio compares monthly debt payments with monthly gross income.
- Direct Deposit
- Electronic payment sent directly into a bank account.
- Dividend Yield
- Annual dividend income divided by investment price or amount.
- Down Payment
- Money paid upfront toward a purchase, usually a home or vehicle.
E
- Effective Interest Rate
- The interest rate after accounting for compounding effects over a period.
- Emergency Fund
- An emergency fund is cash set aside for unexpected essential expenses or income disruption.
- Emergency Fund Ratio
- Emergency savings divided by monthly essential expenses.
- Emergency Savings
- Cash reserved for unexpected expenses or income disruption.
- Employer Match
- Money an employer contributes to a retirement plan based on employee contributions.
- Escrow
- Escrow is an account or arrangement used to hold money for taxes, insurance, or a transaction until conditions are met.
- Escrow Cushion
- Extra money held in escrow to cover property tax or insurance changes.
- Escrow Shortage
- When an escrow account does not have enough money to cover expected tax or insurance bills.
- Expense Ratio
- An investment fund fee expressed as a percentage of assets.
F
- Fee Drag
- The reduction in long-term growth caused by ongoing fees.
- Fixed Expense
- A recurring expense that is usually similar each period.
- Fixed-Rate Mortgage
- A home loan with an interest rate that stays the same for the life of the loan.
G
- Grace Period
- The time between a credit card statement closing date and payment due date when interest may be avoided.
- Gross Income
- Income before taxes, benefits, and deductions.
H
- Hard Inquiry
- A credit check that may affect a credit score because it is tied to a credit application.
- Health Savings Account (HSA)
- A tax-advantaged account available with certain high-deductible health plans.
- High-Yield Savings Account
- A savings account that usually pays a higher rate than a traditional savings account.
- Housing Ratio
- A percentage comparing monthly housing costs with gross monthly income.
I
- Income Replacement Ratio
- A retirement planning estimate of income needed after leaving work.
- Insurance Deductible
- The amount paid out of pocket before insurance pays.
- Interest Rate
- The percentage charged for borrowing or earned on saving before some fees or compounding effects.
- IRA
- An individual retirement account used to save for retirement with tax advantages.
L
- Liquidity Buffer
- Cash kept available for emergencies, delays, or irregular expenses.
- Loan Term
- The amount of time scheduled to repay a loan.
- Loan-to-Value Ratio
- Loan-to-value ratio compares the loan amount with the value of the asset securing it.
M
- Maintenance Reserve
- Savings set aside for repairs and upkeep.
- Minimum Payment
- The smallest required payment due on a credit account for a billing cycle.
- Money Market Account
- A deposit account that may combine savings features with limited transaction access.
- Money Market Fund
- An investment fund that holds short-term debt securities and is not the same as a bank deposit account.
- Monthly Burn Rate
- The amount of cash spent per month after income or reserves.
N
- Net Income
- Income remaining after taxes and deductions.
- Nominal Interest Rate
- The stated interest rate before accounting for compounding or inflation.
- Nominal Return
- Return before adjusting for inflation.
O
- Opportunity Cost
- The value of the alternative you give up when choosing one option.
- Origination Fee
- A fee charged by a lender for creating or processing a loan.
P
- Payment History
- A record of whether debt payments are made on time.
- Payment Shock
- A sharp increase in monthly payment after a rate change, escrow change, or promotional period ends.
- PMI
- Private mortgage insurance may apply to some conventional loans when a borrower makes a smaller down payment.
- Prepayment Penalty
- A fee some lenders charge if a borrower pays off a loan early.
- Principal
- The original amount borrowed or invested before interest.
- Principal and Interest
- The portion of a loan payment that repays borrowed money and interest charges.
- Principal Reduction
- The part of a payment that lowers loan balance.
R
- Rate Lock
- An agreement to hold a mortgage interest rate for a specific period.
- Rate Reset
- A change in interest rate at a scheduled time.
- Real Return
- Investment return after adjusting for inflation.
- Refinance Break Even
- The time needed for monthly savings to recover refinance costs.
- Refinance Fee
- A cost associated with replacing one loan with another.
- Required Minimum Distribution
- Minimum retirement-account withdrawal required by law for some accounts.
- Roth IRA
- A retirement account funded with after-tax money that may allow qualified tax-free withdrawals.
S
- Savings Gap
- The difference between current savings and a target amount.
- Savings Rate
- The percentage of income saved or invested over a period.
- Secured Credit Card
- A credit card usually backed by a refundable security deposit.
- Sequence of Returns Risk
- The risk that poor investment returns early in retirement can reduce portfolio longevity.
- Sinking Fund
- Savings set aside gradually for a known future expense.
- Soft Inquiry
- A credit check that does not affect credit scores.
- Statement Balance
- The balance listed on a credit card statement.
- Student Loan Interest
- Interest charged on student loan balances.
T
- Target Savings Rate
- The percentage of income a household wants to save.
- Tax Credit
- An amount that may reduce tax liability, subject to tax rules.
- Tax Deduction
- An amount that may reduce taxable income.
- Tax Withholding
- Money withheld from income and sent toward expected taxes.
- Taxable Income
- Income remaining after allowed adjustments and deductions are applied.
- Taxable Interest
- Interest income that may be subject to tax.
- Total Interest Cost
- The cumulative interest paid over the life of a loan.
U
- Utilization Ratio
- Credit card balance divided by available credit limit.
V
- Variable Expense
- A cost that changes from month to month.
W
- Withdrawal Rate
- The percentage of savings withdrawn over a period, often used in retirement planning.