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Glossary
Acceptance Letter
A letter from the applicant indicating his williness to accept the loan after the loan is approved by the banking institution.
Account balance
Your account balance is the amount of money you have in one of your financial accounts
Accrued Interest
Accrued Interest is interest that has been incurred but not paid.
Affinity Credit Card
A credit card which is sponsored by a partnering group or organization.
Amortization
Amortization refers to the paying off of debt or a loan amount in regular payments or installments over a pre-determined period of time. These payments cover both the principal and interest.
Annual Fee
Yearly charges normally the cost of maintaining your banking facility.
Application Form
Application material used to apply for the particular loan.
Appraisal/valuation report
Assessment analysis of the estimated value of real estate evaluated by a licensed Valuer/Appraiser
Approval-In-Principle (AIP)
Approval-In-Principle (AIP) is an initial approved loan amount given by the Bank based on the credit report and affordability of the borrower. It is not the final evaluation process and is subject to the property valuation and other checks in the application process. It is typically valid for 30 days.
ATM
Automated Teller Machine. An electronic banking machine, which allows you to complete basic banking transactions without having the assistance of branch representatives or tellers.
Available Credit
Available credit is your credit limit minus your current outstanding balance. It is the unused portion of your credit line or the remaining credit limit.
Balance Transfer
Transferring outstanding credit card balances from one bank to another, usually to take advantage of a lower interest rate. Transfers are limited to the available credit on the receiving card.
Bankruptcy
A legal procedure for dealing with debt problems of individuals and business.
Base Lending Rate (BLR)
A minimum interest rate calculated by financial institutions based on a formula which takes into account the institutions' cost of funds and other administrative costs.
Billing Cycle
The number of days between your last statement date and your current statement date.
Billing Statement
A monthly statement from your credit card issuer which describes and summarizes the activity on your account including the outstanding balance, purchases, payments, credit limit, finance charges and other transactions for the month.
Borrower
Borrower refers to the person that is taking the home loan from the Bank. All owners of the pledged property are borrowers. However, not every borrower is a mortgagor. A non-owner may be included in the loan application as a co-borrower to fulfill the requirements of a loan.
Cancellation Fee
Cancellation Fee is a fee payable when the loan is cancelled before disbursement.
Cash Advance
A cash withdrawal at an automated teller machine, or with a bank teller. This cash is an instant withdrawal from your credit card account. Finance charges will apply from the day you take the advance until the day you pay it off, normally at 18% per annum. A one-time service / withdrawal fee will be charged based on the amount of your withdrawal, normally at 5%.
Caveat
A caveat is a notice of a claim in interest to the property. Once the buyer has paid the deposit for the property, his/ her lawyer will then perform a lodgment of a caveat with the State / Land Authority. Once the caveat has been lodged, it operates to protect the interest claimed by the caveator.
Charge Card
A card that requires full payment of the balance before the end of the billing period.
Collateral
Collateral is the property you secure to the bank or financial institution for your home loan granted.
Credit History
Your credit history is a record of the way you manage your credit facility; including payment history, loan application history, and others.
Credit Limit
The amount of credit extended to the credit cardholder.
Debt Service Ratio (DSR) / Debt Income Ratio (DIR) / Debt Burden Ratio (DBR)
Debt Service Ratio is the ratio of debt over take home income, expressed in percentage. The lower the ratio, the financial status is supposedly healthier. The loan approval process also depends on the type of property, employment and income level. The DSR of each bank varies.
Default / Delinquent
Failing to repay the monthly installments according to the due date. Once a Notice of Default is issued, the property that was pledged as collateral may be repossessed by the Bank. This would normally be the case when the borrower has failed to pay more than one month’s due of monthly installment.
Delinquency
When loan payments or credit card dues are not paid accordingly by the due date, late charges are often imposed on delinquent accounts.
Discount Privileges
Discounts enjoyed by cardholders at selected merchants for purchases charged to credit or debit cards.
Disbursement Fees
Disbursement fees are fees incurred by solicitors attending to the loan documentation by the borrower such as registration of charge fee, land search fee, bankruptcy search fee, transmission fee, assignment fee, filing of entry and withdrawal fee, and others.
Documentation
Set of agreements, forms, and other supporting documents to be signed or submitted in connection with the approval or disbursement of the loan.
Downpayment
An initial payment or deposit made by the buyer to the seller in relation to the purchase of the property.
Due Date
The date a payment is due to the creditor.
Early Settlement
Settling the loan balance in full earlier than the date which have been initially agreed upon under the financing agreement.
Early Settlement Penalty
A fee or penalty charged by the banking institution for early settlement of the loan in full.
Equity fund
An investment fund that invests primarily in the share market.
Finance Charges
Finance charges are charges such as interest and fees, paid by the consumer to the creditor for obtaining a loan or using a credit facility.
Financial Institutions
All commercial banks and finance companies licensed under BAFIA 1989 and Islamic banks licensed under the Islamic Banking Act 1983.
Financial Goals
An intended achievement by someone within the specified period of time.
Financial Mediation Bureau
An agency established under the Companies Act 1965 to act as mediator to settle disputes between financial service providers and their customers.
Financing Tenure
A period of years required to fully complete the financing amount as agreed under the home loan package.
Fire Insurance
Fire Insurance provides insurance coverage for loss and damages to your property caused by fire.
Fixed Interest Loan or Fixed Rate Loan
Fixed interest loan is where the interest charged is fixed throughout the tenure of the loan tenure.
Flat Rate
Flat rate interest is charged as a fixed percentage of the loan amount throughout the tenure of the loan. The flat repayment amount is usually determined before the commencement of the repayment programme.
Floating Rate Loan
Floating term loan describes a loan, where the interest charged fluctuates due to the rise and fall of the reference rate indicator such as the Base Lending Rate.
Foreclosure
Foreclosure is a legal action available to the financial institution for recovering outstanding sums owed by a borrower who has defaulted on his/her loan. The property pledfed by the borrower to secure the loan is sold and the proceeds of the sale will be used to settle the outstanding of the loan amount.
Grace Period
Grace period is the time you have to pay the outstanding balance before interest charges apply.
Gross Monthly Household Income
The sum of gross monthly pay of all working family members before deducting income tax, Sosco, EPF, loan installment or other deductions plus any additional income from overtime, commissions and other sources.
Guarantor
Guarantor refers to the person who is legally bound to pay a debt incurred by the borrower if that borrower fails to pay.
Home Insurance / Mortgage Reducing Term Assurance (MRTA)
Home Insurance protects the borrower's family from losing the home should the borrower becomes mentally/physically disabled or pass away before the home loan is fully repaid
Home Loan / Mortgage Loan
Home Loan / Mortgage Loan is a loan secured by the borrower’s property. Failure to make repayments on the loan could result in losing the property / repossessed, that is secured against the loan.
Installment
Monthly payment that the borrower has to pay the bank or the financial institution as stated in the loan financing agreement.
Interbank Giro / IBG
An electronic funds transfer payment system for interbank payments.
Interest Rate
Interest Rate is the rate of interest that is charged on the loan. It can be fixed, variable, or a combination of both over the loan period:-
  • Fixed Rate Loan
    • A fixed rate loan charges the same rate of interest throughout the duration of the loan.
  • Variable Rate / Floating Rate Loan
    • A variable rate loan is usually benchmarked against the reference rate by Bank Negara. The reference rate can be the base lending rate, base financing rate and others.
  • Combination of Fixed and Variable Rate Loan
    • This loan usually begins with a fixed interest rate for a number of years before switching to a variable interest rate.
Joining Fee
One time joining fee imposed on cardholders for accepting the card.
Joint Tenancy
Joint Tenancy refers to the manner of ownership in a property. All the owners have an equal interest in the property regardless of the amount of money each co-owner had contributed towards the purchase of the property.
Late Charge / Late Payment
A penalty charged by financial institution for not paying the monthly installment due on time.
Legal Fee / Conveyance Fee
Legal Fee refers to the fee incurred for hiring a lawyer to handle all the legal paperwork during the property purchase when taking up a home loan. It includes the Conveyance Fees that is incurred for all the legal and administrative work associated with transferring the ownership of land or property from one owner to another.
Letter of Offer (LO) / Facility Letter
Letter of Offer (LO) is given by the Bank to the borrower upon acceptance of the loan application. It is a contract that states the terms of the loan package offered to the borrower. The borrower will sign the LO once the terms are accepted and both parties are bound by the contract from there on.
Liquidity
The degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is an important consideration especially for short-term investments as well as the ease to convert to cash to finance expenditure.
Loan Amount
Loan amount is the total amount the borrower agrees to repay the Bank, in accordance to the terms and conditions of the loan agreement.
Loan Tenure
Number of years taken to fully repay the loan principal and interest as agreed under the loan agreement.
Loan-to-Value (LTV)
Loan-to-Value (LTV) is the loan amount the borrower may borrow as a percentage of the current market valuation or adjusted purchase price of the property (whichever is lower). LTV may be up to 90% subject to regulatory requirements and the bank's prevailing credit policy.
Lock-in Period
Lock in period for a loan cannot be paid-off or refinanced earlier than scheduled in the lock in period without incurring a penalty fee by the bank
Margin of Financing
The loan amount granted by the bank or financial institution, expressed as a percentage of the value of property pledged to secure the loan.
MEPS
A consortium set up by domestic banking institutions to provide shared banking services, such as shared ATM network and Interbank GIRO.
Minimum Income
Minimum annual income requirement in order to qualify for a credit facility
Non-Zero Entry / Moving Cost Loan Package
A loan package where borrowers have to pay for all charges and fees involved in obtaining / refinancing a loan, such as legal fees, stamp duty, valuation fees and disbursement charges.
Outstanding Loan
Remaining loan not yet paid, including interest and other charges.
Overdraft
A type of credit facility granted to the eligible current acount holder. The borrower is allowed to issue cheques exceeding the credit balance in the current account but subject to a certain pre-approved credit limit granted by the bank or financial institution.
PIN / Personal Identification Number
Abbreviation for Personal Identification Number, often used as an access code to ATMs or debit machines.
Phishing
The act of phishing is a criminal form of identity theft set up like a website that looks similar to banks. The criminals then use the personal information to access confidential information on the victims banking account.
Post-dated Cheque
A cheque written with a future date.
Power of Attorney
A formal legal document giving authority to one person to act on behalf of another person.
Prepayment
Payment in full or partial of a loan before the maturity or due date.
Prepayment Penalty
A fee charged by financial institutions for early payment of loan in full. The fee charged is usually based on a percentage of the loan amount and depending on the remaining months of interest.
Principal
The capital amount borrowed from bank or financial institutions, excluding interest and other charges.
Property
Refers to real estate like house, apartment, condominium, and land.
Property Tax
Property tax is government tax payable annually, based on a percentage of the annual market value of the property.
Rebate Card
A credit card benefit such as cash back reward, based upon the credit card's usage normally in terms of percentage.
Refinancing
Refinancing refers to going to a different bank to apply a new loan to replace the existing loan
Repossess
A move by the bank to recover the property or motor vehicle from the defaulted hirer in an attempt to recover the debt.
Repossessor
An agency authorized by the banking institution to repossess properties or motor vehicles from defaulted hirers on behalf of the banking institution. The authorized repossessor has to be registered with the Association of Hire Purchase Companies Malaysia.
Revolving Credit
A credit line that allows customers to pay all or part of the outstanding balance on a loan or credit card and is then allowed to use the credit again when they are needed.
Reward Programmes
Loyalty programmes implemented by card issuers to reward their cardholders for subscribing / using their credit cards.
Sale and Purchase Agreement
Sales and Purchase agreement is a written private contract signed between the buyer and seller stating the sale and purchase of the property.
Securities
Investment instruments traded on the stock exchange. They can be shares, warrants or fixed income securities.
Security
In financial terms, security is property as collateral that guarantees the repayment of a loan. The borrower risks losing the property if the loan is not repaid according to the financing agreement.
Stamp Duty
Stamp Duty is a government tax on certain legal documents and financial contracts which validates the documents or contracts legally.
Start-up Capital
Capital needed to start or finance the business operations.
Term Financing
A financing facility with periodic installments, over a specified period of time.
Term Loan
A loan which is repaid through regular periodic payments, usually over a period of time, for example 10 years.
Title Deed
A legal document establishing the evidential legal right or title of ownership to the property.
Trading Account
An account opened by dealers for investors. The account indicates the amount invested and shows movements of investor's fund through buying and selling of commodities traded.
Transaction Date
The date a purchase is made or cash is withdrawn from the credit card.
Transaction Fee
Processing charges for using various credit activities.
Unit trusts
Pools of money managed by an investment company. They offer investors a variety of choice, depending on the fund and its investment objective.
Valuation Fee
Valuation Fee is payable for the process of determining the market value of the property. The bank or financial institution will require a valuation of the property to calculate the maximum amount of loan they can lend. The valuation is usually done by an independent valuer. Factors taken into consideration in assessing the property include location, size, condition of building, availability of facilities, and marketability factor
Yield
Yield means returns. A term commonly used in measuring investment earnings.
Zero Balance
Zero balance is when the total outstanding balance is paid and there are no new charges during a billing cycle.
Zero entry / moving cost
A loan package whereby the bank or the financial institution will finance other fees and charges that will be incurred by the borrower, for example, sales and purchase agreement, loan agreement, stamp duty for both agreements and appraisal / valuation fees.
Zero 0% Installment Plan
A zero percent interest system by which payment for merchandise is made in installments over the principal over a fixed period of time. There will not be any interest charges over this period.