Money words can feel like another language. This glossary explains the most common terms in plain English, with a link to the guide or calculator where you can see each idea in action. Use the list to jump to a term.
APR (annual percentage rate)
The yearly cost of a loan, including interest and certain fees, shown as a percentage. Use it to compare loan offers. Guide: What is APR? →
APY (annual percentage yield)
The yearly return on savings after compounding. A higher APY means your savings grow faster. Compound Interest Calculator →
Amortization
Paying off a loan in regular installments so each payment covers interest first and the rest reduces principal. Early payments are mostly interest. Loan Calculator →
Principal
The original amount you borrow, or the balance still owed apart from interest. Loan Calculator →
Interest
The cost of borrowing money, or the reward for lending or saving it, usually stated as a yearly percentage. Guide: How compound interest works →
Compound interest
Interest earned on both the original amount and previously earned interest, so growth accelerates over time. Guide: How compound interest works →
Simple interest
Interest calculated only on the original amount, not on interest already earned. Guide: How compound interest works →
Down payment
The upfront cash you pay toward a purchase, such as a home or car. A bigger down payment means a smaller loan. Mortgage Calculator →
Escrow
An account your lender may use to collect part of your monthly payment and pay property taxes and homeowners insurance for you. Mortgage Calculator →
PMI (private mortgage insurance)
Insurance that protects the lender, often required on conventional loans with less than 20% down. It adds to your monthly cost. Mortgage Calculator →
Closing costs
Fees paid when finalizing a home loan, such as lender, appraisal and title charges. They are separate from the down payment. Closing costs guide →
Refinance
Replacing an existing loan with a new one, often to lower the rate or change the term. Fees can offset the savings. Refinance Calculator →
Discount points
Fees paid upfront to lower a mortgage interest rate. Whether they pay off depends on how long you keep the loan. Points break-even guide →
Fixed rate vs. variable rate
A fixed rate stays the same for the life of the loan. A variable rate can change, so your payment can rise or fall. Loan Calculator →
Credit score
A number, often 300 to 850, estimating how reliably you repay debt. It affects approvals and the rates you are offered. Guide: What is a credit score? →
Credit utilization
Your credit card balances divided by your credit limits. Lower is generally better for your score. Guide: What is a credit score? →
Debt-to-income ratio (DTI)
Your monthly debt payments divided by your gross monthly income. Lenders use it to judge how much more debt you can handle. Debt-to-Income Calculator →
Minimum payment
The smallest amount you must pay on a card or loan each month. Paying only the minimum can keep you in debt for years. Minimum payments guide →
Balance transfer
Moving a debt balance to another card, often to get a lower promotional rate. Check the transfer fee and the rate after the promotion ends. Balance Transfer Savings Calculator →
Debt snowball and debt avalanche
Two payoff strategies. Snowball pays the smallest balance first. Avalanche pays the highest interest rate first. Guide: Snowball vs. avalanche →
Emergency fund
Savings set aside for unexpected costs such as repairs, medical bills or job loss. A common goal is three to six months of essential expenses. Guide: Emergency fund →
Budget
A plan for how you will spend and save your income each month. Guide: First budget →
Gross income vs. net income
Gross income is what you earn before taxes and deductions. Net income, or take-home pay, is what you actually receive. Salary Calculator →
Net worth
Everything you own (assets) minus everything you owe (debts). Tracking it shows your progress over time. Financial Checkup →
Inflation
The general rise in prices over time, which reduces what each dollar can buy. Inflation Calculator →
Diversification
Spreading investments across different assets so that one poor performer does less damage to the whole. Investment Calculator →
Index fund
A fund that holds the securities in a market index, such as the S&P 500, often with low fees. Returns follow the market and are not guaranteed. Investment Calculator →
Expense ratio
The yearly fee a fund charges, shown as a percentage of your investment. Small differences compound over decades. Investment Calculator →
401(k) and IRA
Tax-advantaged retirement accounts. A 401(k) is offered through an employer. An IRA is opened on your own. Rules and limits change, so check current details. Retirement Calculator →
Rule of 72
A shortcut: divide 72 by your annual return to estimate the years needed to double your money. Guide: Rule of 72 →
Origination fee
A fee a lender charges for processing a loan, often a percentage of the amount. It can be deducted from the money you receive. Guide: What is APR? →
Common questions
Is this glossary financial advice?
No. It explains terms for education. Rules, limits and rates change, so check current details with official sources or a qualified professional.
How are the examples on IQlator calculated?
We use standard formulas with the inputs stated on each page. See the methodology page for details.