401k – A retirement plan put in place by an employer; eligible employees make contributions from their pay, and employers may choose to contribute or match certain percentages.
403(b) – A retirement savings plan for public education organizations and non-profit organizations.
501(c)3 – The tax-status of non-profit organizations that are registered with the IRS.
Amortization Schdule – The schedule of payments that shows the breakdown of principal and interest for each payment.
Annual Percentage Rate (APR) – The rate that is charged when a person borrows. It is slightly higher than the interest rate for the same loan because it includes all fees or other costs associated with the closing of the loan.
Annual Percentage Yield (APY) – The rate at which a savings account accrues interest.
Appraisal – An assessment by a third party which establishes the value of the asset you are attempting to purchase. They are often required when financing real estate.
Bank – A financial institution that is owned by a group of stockholders who receive annual dividends based on the number of shares each owner has and the amount of income that was generated by the bank.
Bankruptcy – A legal process for which a person or business can file if they are unable to repay their outstanding debts. There are several different types of bankruptcy, and certain debts are exempt from bankruptcy proceedings.
Beneficiary – A person or entity who an account- or asset-holder designates as the recipient of their property or insurance funds.
Bounced Check – A check that is unable to be processed because the account it is drawn on does not have sufficient funds (the account would become negative if it was processed).
Budget – A financial layout of the income and expenses a person expects to incur.
Checking Account – A spending account from which a person can write a check and present it as payment. Once the check has been processed by the payee’s financial institution, the funds are removed from the payer’s account. There may be a delay between when the payer writes/presents the check and when it is removed from the account, so the payer must account for this and ensure they leave sufficient funds in the account for the check.
Closing Costs – A one-time collection of fees and costs associated with the finalization and closing of a home loan, including but not limited to processing fees, credit report fees, down payments, insurance costs, title fees, etc.
Co-signer/Co-maker – If there is more than one person on a loan, the additional person/people are known as co-signers. People who have minimal credit history, do not have a high enough credit score, or have too high of a DTI may be required to have a co-signer.
Collateral – An asset that is used as security in exchange for the loan. If the borrower becomes delinquent (fails to pay) on the loan, the financial institution can seize the collateral in exchange.
Collections – When a loan goes into default (meaning a borrower has been delinquent with their payments), collections takes over and actively seeks payment from the borrower. If the borrower fails to make payments or communicate with the collections agency, the collateral for the loan may be repossessed.
Commission – The fee that is charged for certain services, often based on a percentage of the value of the asset being purchased.
Compound Interest – Interest that is calculated on the principal balance and any interest that has already accumulated on the loan (in contrast to simple interest, which is calculated on only the principal balance of the loan).
Contingency – A condition that a buyer or seller puts into a purchase agreement regarding the inclusion or exclusion of an asset, expense, or repair; for example, a buyer who makes an offer on a house could include a contingency that the purchase of the home includes all appliances (asset), their realtor’s fees (expense), and an updated electrical panel (repair).
Credit – The ability to borrow money (obtain a loan) that the person promises to pay back over a certain period of time, usually including interest.
Credit Bureau – A company that tracks a person’s credit activity and assigns them a score so potential creditors (financial institutions who give loans) can determine a person’s creditworthiness when they apply for financing. The three primary credit bureaus are TransUnion, Equifax, and Experian.
Credit History – All of the loans a person has had over the past 7-10 years, including paid off loans and current loans.
Credit Limit – Open lines of credit, such as a home equity line of credit or a credit card, have a spending limit; this means that you can spend up to that amount and then you have to make payments to free up those funds for use again.
Credit Report – An organized account of a person’s credit history; it includes information such as the types of loans, payment history, collections, and outstanding balances, and it lists their current credit scores as of the moment the report is run.
Credit Score – A number assigned to a person based on their credit history. It is used by financial institutions to determine the creditworthiness of the person. All three primary credit bureaus (TransUnion, Equifax, and Experian) assign their own score to an individual, and these scores can vary due to their differing criteria.
Credit Union – A financial institution that works like a cooperative. Instead of being a for-profit business owned by typical shareholders, it is a not-for-profit where every member who has an account owns a share of the organization. Because of this, all net profits are put back into the credit union so they can charge less fees and offer more loans.
Creditor – An entity that provides financing (loans), such as a credit union or a bank.
Creditworthiness – How likely a person is to repay their debts; this is usually determined based on their credit history and credit score.
Debt-to-Income (DTI) Ratio – A percentage that represents how much a person owes (monthly debt payments, including rent) in comparison to how much money they make (monthly gross income); this is one criteria that is used when determining whether or not to grant a loan. For example, if a person makes $5,000 per month before taxes and pays $1,000 in monthly debt payments, their DTI ratio is 20%.
Deductible – A set amount of money that a person must pay out of pocket in a calendar year before their insurance will cover a claim.
Deflation – When the value of the national currency increases and a the cost of goods/services decreases.
Delinquency – Failure to make the minimum monthly payment on a loan. If a person misses enough payments, their loan may default and be sent to collections.
Direct Deposit – When a person’s paycheck is set up to be deposited into their account on payday instead of receiving a physical check.
Diversity – The broadness of a person’s credit portfolio; for example, a diverse loan portfolio is a person who has several different kinds of loans.
Dividend – The amount that is paid out to an account-holder or investor based on a predetermined rate.
Earnest Money – When purchasing a home, a payment provided to the seller upon signing a purchase agreement to show that you are a serious buyer; if the sale falls through due to the seller pulling out or a contingency failing to be met, the funds are reimbursed to you, but if you choose to pull out, the seller keeps them.
Electronic Funds Transfer Act (Regulation E) – This regulation by the Federal Reserve (15 U.S.C. § 1693 et seq.) protects consumers who engage in electronic funds transfers, such as:
Equal Credit Opportunity Act – This regulation (15 U.S.C. § 1691 et seq.) prohibits creditors from discriminating based on:
eStatements – The electronic delivery of a person/entity’s bank statements, which contain all current balances and transactions for the statement period.
Expedited Funds Availability Act (Regulation CC) – This regulation (12 U.S.C. 4001-4010, 12 U.S.C. 5001-5018) provides guidelines for financial institutions regarding “[making] funds deposited into accounts available for withdrawal, including availability schedules” and “to expedite the collection and return of checks and electronic checks by banks.” It is intended to protect the consumer from predatory financial institution practices and to protect financial institutions from fraud and loss.
Expense – A cost, either one-time or recurring, that a person/entity incurs.
Fair Debt Collection Practices Act – This regulation by the Federal Trade Commission (15 U.S.C. § 1692-1692p et seq.) provides the consumer with “legal protection from abusive debt collection practices.”
Fair Credit Reporting – This regulation by the Federal Trade Commission (15 U.S.C. § 1681-1681x et seq.) was created to protect consumers by promoting “the accuracy, fairness, and privacy of consumer information” as recorded by reporting agencies.
Federal Reserve – A governmental agency that monitors the economy and financial health of the country, as well as manages United States currency.
Financing – When a person seeks funding from a financial institution, usually in the form of a loan, with the understanding that the institution will cover the initial cost of an asset in exchange for that person paying back the funds over time.
Fixed Rate – A rate that is determined at the beginning and is not subject to change during the life of the loan.
Foreclosure – The final step of a home loan delinquency; if the financial institution has made a good faith effort to obtain payment from the member but the member is unable to fulfill their financial obligation, the financial institution takes ownership of the collateral (the property).
Free Application for Federal Student Aid (FAFSA) – An application that all college students must complete in order to pursue their federal student aid options.
Grace Period – For loans: A set period of time after the payment due date, usually 7-10 days, in which a person can make a late payment with no consequences. Special savings accounts, like share certificates: A period after the maturity date during which the person can still withdraw the funds before they are automatically renewed or deposited.
Gross Income – Your income before taxes and benefits are deducted. For example, if you are paid hourly and work full-time at $10 per hour, your gross monthly income would be calculated in the following way:
Gross annual income = (40 hours/wk × $10/hr × 52 wks/year) = $20,800.00/year
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Gross monthly income = (40 hours/wk × $10/hr × 52 wks/year) ÷ 12 months = $1,733.33/month
Home Mortgage Disclosure Act (Regulation C) – This regulation (12 U.S.C. 2803, 2805, 5512, 5581) “requires financial institutions, including credit unions, to compile and disclose data about home purchase loans, home improvement loans, and refinancings that they originate or purchase, or for which they receive applications.”
Home Inspection – An assessment done by a third party to determine the condition of the asset you are attempting to purchase. These are not required by lenders, but they are encouraged.
Identity Theft – When a person’s financial self and/or personal information is compromised, usually to benefit a criminal/scammer. While there is always some risk of identity theft, the risk is much lower if a person is very careful with their personal information, such as social security number, accounts numbers, and login information.
Individual Retirement Account (IRA) – This is a pension account a person can open and deposit into that serves as an investment. The funds can be removed from the account in consistent payments known as “distributions” once the person becomes of retirement age. Depending on the type of IRA you open, you can choose to make the deposits pre-tax (in which case the tax will be applied when distributions are made) or post-tax (in which case the tax is applied when the deposit is made).
Inflation – When the value of the national currency decreases as the cost of goods/services increases.
Inquiry – Whenever you apply for financing, it will show up on your credit report as an inquiry. If you apply too many times within a certain period, it will result in several inquiries, which can have a negative impact on your report and score. Note: If you apply in close succession, such as having multiple institutions pull your credit over a couple days to see who can give you the best auto loan rate, the credit bureaus usually recognize those as reasonable shopping for rates and will list it as only one inquiry on your report rather than multiple.
Installment Loan – A loan that typically has a fixed term (number of payments), fixed interest rate, and fixed monthly payment; for example, auto loans and student loans are types of installment loans.
Insurance – A program where the insured person pays a premium (usually monthly, but sometimes annually) to an insurance company; in exchange, the insurance company provides compensation for damages to the asset that is being insured, minus any predetermined deductible.
Interest – Additional money that is paid to the lender based on either a fixed or variable rate as a cost of financing.
Interest Rate – The rate at which a loan accrues interest, based on the principal amount of the loan.
Investment – Money that a person puts into an asset with the intention that the asset’s increasing value will pay off over time. With investments, there is a risk that the asset’s value will remain stagnant (meaning return the same value you put in) or decrease (meaning you will lose money).
Late Fees – Fees that are charged when a person makes a payment on their loan after the grace period (usually more than 7-10 days after the due date).
Line of Credit – A line of credit, like a home equity line of credit (which is used for making home improvements or repairs), is a set amount of funds that are available for you to spend, almost like a recurring loan. The funds you borrow off that line will accrue interest, and you will have a monthly payment. Once you make a payment, those funds are again available for you to borrow.
Loan – Funds that a creditor (usually a financial institution) provides to a consumer with the understanding that the person will pay the funds back over time. Usually, the consumer pays a small percentage of interest on those funds as payment to the financial institution for their services.
Loan-to-Value (LTV) Ratio – A percentage that represents how much financing was provided in comparison to the value of the asset/collateral; for example, if a person obtains a home loan for $80,000 when purchasing a $100,000 home, the LTV ratio would be 80%.
Mobile Deposit – Software that allows a consumer to take a photo of a check they have been given and deposit it digitally, usually via a mobile app, into their banking account rather than mailing it in or providing it in person.
Mortgage – A legal agreement with a creditor in which you borrow funds using your home as collateral; you can purchase a new home or refinance your current home, even if your current home was already paid off.
National Credit Union Association (NCUA) – The governmental organization that regulates the operation of credit unions in the United States and provides credit union members with share insurance.
Net Income – Your income after taxes and benefits are deducted. For example, if you are paid hourly and work full-time at $10 per hour, and you have 22% deducted for taxes, your monthly income would be calculated in the following way:
GMI = (40 hours/wk × $10/hr × 52 weeks/year) ÷ 12 months = $1,733.33/month
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Net Monthly Income: $1,733.33 × 78% = $1,352/month
Non-Sufficient Funds (NSF) – When a person presents a check for payment or attempts to use a debit card but does not have enough funds in the account to cover the transaction.
Overdrafts – When there are non-sufficient funds in the account but the payment is transacted anyway, it results in an overdraft and the account has a negative balance. Most financial institutions have a fee to discourage people from overdrafting frequently.
Person-to-Person (P2P) Apps – These are mobile apps that allow a person to send funds electronically to another person/entity quickly and easily. Sometimes, there is a fee to either send the funds or to receive them. Venmo, PayPal, Zelle, and CashApp are the most widely used examples.
Personal Loan – This is another name for an installment loan or signature loan and has a broad purpose. A personal loan can usually be used for almost anything, such as furniture, medical expenses, travel expenses, etc.
Premium – The amount a person must pay to an insurance company (usually monthly, semi-annually, or annually) in exchange for the insurance coverage.
Phishing – A fraudulent email or personal message that appears to come from a legitimate source but has the goal of obtaining personal information from the recipient.
Principal – The original amount of funds that a person borrows and must repay. That means it excludes the loan fees and interest.
Recession – An economic decline; this can happen based on several things, including but not limited to: weakened purchasing power of the national currency, high unemployment, a decrease in overall spending, high interest rates, and low or static wages.
Remote Deposit – Another way of saying mobile deposit, or the capability to deposit checks digitally with a mobile app.
Repossession – The final step of a loan delinquency; when a financial institution has made a good faith effort to coordinate payment with a member who is delinquent on a loan but the member is unable to fulfill their obligation, the financial institution takes ownership of the collateral that was used for the loan. For auto loans, the collateral is the automobile; for mortgages, the collateral is the home, though it is known as a “foreclosure” in that case.
Revolving Credit – Instead of typical loans, which you pay off and then they are closed, these types of credit can be paid off and then reused over and over until you or the creditor chooses to close it. The most common types of revolving credit are home equity lines of credit and credit cards.
Right to Financial Privacy Act – This regulation (12 U.S.C. 35) dictates the guidelines for how and when the government can access consumers’ financial records, as well as the requirements for notifying the consumer of said access.
Saving – The act of putting money aside rather than spending it so it can be used for a future purpose.
Savings Account – An account specifically for storing saved funds.
Secured Loan – A loan for which collateral is required obtained (such as auto loans, home loans, or share-secured personal loans).
Share Account – The term for a savings account at a credit union.
Share Certificate – A special savings account that yields higher interest for the member. To incentivize them to leave the funds in the certificate to mature, there are usually limitations for early withdrawal of the funds.
Share Draft Account – The term for a checking account at a credit union.
Share-secured Loan – A loan for which a person puts up their savings as collateral. If the person defaults on the loan, the financial institution can retain ownership of enough funds to cover the outstanding balance and fees.
Signature Loan – Also known as a personal loan or signature loan.
Simple Interest – Interest that is calculated on only the principal balance of the loan (in contrast to compound interest, which is calculated on the principal balance and any interest that has already accumulated on the loan).
Stale-dated Check – This is a check which is dated more than 6 months prior to when someone tries to negotiate it. Many financial institutions will reject stale-dated checks and require that the person obtains an updated check in order to negotiate it. This is to protect all parties involved; it protects the financial institution from fraud or loss and protects the payee from any potential fallout of processing a check that does not have sufficient funds or is from a closed account.
Statements – Periodic account summaries which contain all current balances and transactions for the statement period.
Term – The length of your loan, which denotes the number of payments. Typically, loans have monthly payments, which means an auto loan with a term of 36 months would have 36 monthly payments to pay it off.
Truth in Lending Act – This regulation (15 U.S.C. 1601 et seq.) protects consumers by requiring creditors to disclose loan terms prior to closing. Applicable items include but are not limited to loan term (number of payments), annual percentage rate, and fees.
Unsecured Loan – Usually, these are personal loans (also known as installment or signature loans) or credit cards; it is a loan for which no collateral is required/obtained. The loan is made in good faith regarding the borrower’s integrity and ability to pay.
Variable Rates – A loan rate that can change based on market conditions. For example, a home equity line of credit has a variable rate, which can vary month-to-month.
There’s no question about it: we’re different but in the best way. We make you and your financial well-being our priority.
700 E. Sharon Ave.,
Houghton, MI 49931
Call or Text: 906.482.5005
Fax: 906.482.2451
Email: info@breakwaterfcu.org
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We will observe the following closures for the winter holidays:
CLOSED on Christmas Eve, Christmas Day, and New Years Day (Dec 24, Dec 25, and Jan 1). OPEN 8:30-12pm on New Years Eve (Dec 31).
Remember, you can perform most of your banking business via our mobile app or our 24/7 deposit ATMs (credit union drive-up and Calumet AmericInn)!
