Finance Dictionary
Global Expert Solutions
Global Expert Solutions provides you with this financial glossary of banking and non-banking terms used by all banking institutions and NBFIs in Romania.
This short glossary is designed to help you find answers to all your questions, such as “what is it and what does it mean” regarding the terms used by financial professionals.
- Loan file analysis – The process through which the banking or non-banking institution where the prospective borrower applies for a loan evaluates the credit file. The file assessment involves analyzing risk factors and the prospective borrower’s ability to repay the loan in accordance with the credit agreement.
- Down payment or own contribution – The amount of money covered by the borrower from their own funds in order to complete the total financed amount, for the purpose for which the loan is contracted.
- Capitalization – Represents accumulation through addition. Interest capitalization refers to the automatic addition of interest upon reaching the maturity date of a money deposit.
- Credit card – This type of card is funded by a banking and/or non-banking financial institution, and the cardholder is required to repay the funds in accordance with the credit agreement concluded between the bank or NBFI and the borrower.
- Debit card – This type of card is funded directly by the cardholder or by their employer. A common example of a debit card is a salary card.
- Embossed card – Embossed cards have raised identification details printed on them, allowing the cardholder to make payments anywhere. Example: manual billing, ATM, POS, and online payments (Internet).
- Imprinted card – These types of cards do not have raised identification details and can only be used in electronic environments.
- Cash collateral or collateral deposit – The amount of money provided by the borrower or guarantor as security for obtaining a banking and/or non-banking loan. These funds remain blocked for the entire duration of the credit agreement. The deposit is returned to the owner only after the loan has been fully repaid. In the event that the borrower stops repaying the loan, the banking or non-banking institution takes possession of the collateral deposit provided as security.
- Credit application – A written request submitted by an individual or legal entity to a banking or non-banking financial institution for the granting of a loan.
- Assignment – A document through which the borrower provides certain receivables rights as collateral to a bank. If the borrower stops repaying the loan, the banking institution takes possession of the assigned receivables rights granted at the signing of the credit agreement.
- Claim – The creditor’s right to receive something from the debtor or to demand something from them.
- Commission – An amount of money paid by the borrower to the bank or non-banking financial institution for services related to a loan.
- Current account – The account into which the bank disburses the loan amount and from which it also deducts the monthly repayment instalments. This account must be funded monthly by the borrower to ensure that payments are made on time, in accordance with the terms of the credit agreement.
- Credit agreement – The agreement between a banking or non-banking financial institution and the borrower, under which the institution agrees to provide a certain amount of money, and the borrower agrees to repay it according to the agreed terms. The credit agreement includes all necessary details – the loan amount, repayment term, interest rate, the rights and obligations of each party, the established guarantees, and so on.
- Contracting party – The individual or legal entity that enters into a contract. The contracting party is the borrower who obtains a loan and agrees to repay it according to the contractual terms.
- Credit – The amount of money that a lender provides to an individual or legal entity in exchange for interest.
- Bank loan – The amount of money that a banking and/or non-banking financial institution provides to an individual or legal entity in exchange for interest. A bank loan is granted under clearly defined and carefully established conditions.
- Construction loan – The amount of money provided by a banking institution to an individual or legal entity, allowing the borrower to build their desired property.
- Consumer loan – A loan through which the borrower can purchase goods intended for long-term use. Example: furniture, household appliances, gadgets, automobiles, etc.
- Personal loan – A loan through which the borrower is not required to justify how the funds will be used. This type of credit is intended to finance all types of personal needs. Example: renovations, travel, legal or medical expenses, studies, and so on.
- Real estate loan – A loan through which the borrower obtains a large sum of money, which must be repaid over a shorter or longer period, according to the conditions set by the lending financial institution. This type of credit can be used for purchasing a property, building a property, modernizing or extending a home, acquiring land, or refinancing other real estate or mortgage loans.
- Creditor – A banking institution or NBFI that provides loans.
- Mortgage loan – A loan obtained by the borrower for the purchase, construction, or renovation of a property. The borrower secures the loan with the property that is the subject of the financing. A mortgage loan can also be used to purchase land.
- Eligibility criteria – The conditions that the prospective borrower must meet in order to obtain a loan from the financing institution.
- Borrower – An individual or legal entity that has taken out a loan from a banking or non-banking financial institution.
- Interest – The amount of money that the borrower agrees to pay the lender in exchange for the loan received.
- Annual Percentage Rate (APR) – The total cost of the loan expressed as an annual percentage of the total credit amount, representing, over a one-year period, the total value of all commitments. It includes the costs of opening and maintaining a specific account, the costs of using a payment instrument for both transactions and withdrawals from that account, as well as other payment-related costs, whenever the opening or maintenance of an account is required in order to obtain the loan or to obtain it under the offered terms and conditions.
- Credit file – All documents that the prospective borrower must provide to the banking or non-banking financial institution for the approval and granting of the requested loan.
- Co-borrower – An individual or legal entity that participates, together with the borrower, in the repayment of the bank loan obtained.
- Property valuation – The process through which the banking institution assesses the financed property via a certified appraiser. The valuation of the property, which serves as collateral for the loan, is required because the bank finances an amount lower than its market value. For individuals, the bank provides up to 85% of the property’s value, while for legal entities, financing may reach up to 75% of its
- Franchise – A contract through which the franchisor grants the franchisee the right to operate independently within the same business owned by the franchisor. Owning a franchise essentially means running your own business. The franchisee receives a ready-made business from the franchisor, along with its internal know-how. Franchises may be granted free of charge or in exchange for a fee, depending on the agreement between the franchisor and the selected franchisee. Franchises have a success rate of up to 85%.
- Franchisor – The person or entity that grants a franchise.
- Franchisee – A legal entity that receives a franchise from the franchisor. In short, the beneficiary of the franchise.
- Debt-to-income ratio or monthly installment / income ratio – The ratio between the monthly amount the borrower must pay to the banking institution for the loan obtained (i.e., the monthly installment) and their net income. The maximum limit of this ratio varies from one bank to another, and each bank has its own internal policy for assessing risk factors when deciding to grant a loan.
- Banking institution – A financial institution (bank).
- Non-banking financial institution (NBFI) – An entity that carries out lending activities on a professional basis, under the conditions established by law. These non-banking institutions offer the same types of loans as banks, under more flexible conditions, but with higher interest rates compared to bank loans.
- Mortgage – The right of the banking or non-banking financial institution over the assets provided by the borrower as collateral for obtaining the desired loan. If the borrower stops repaying the loan, the bank has full rights over these assets in order to recover the loss caused by the borrower.
- Loan term – The contractual period from the moment the loan is granted until it is fully repaid by the borrower. Once the loan is fully repaid, the loan term comes to an end.
- Wage garnishment – The withholding of a sum of money from a salary in order to cover a debt. Wage garnishment is applied when the borrower delays or stops paying the instalments for the loan obtained, or fails to pay current debts to various institutions on time (for example: fines, taxes, and duties).
- POS (Point of Sale) – A device used to process card payments in a secure electronic environment.
- Risk – The likelihood estimated by a bank/NBFI when deciding whether or not to grant a loan to an individual or legal entity. The assessment of the risk factor aims to prevent potential financial loss.
- Instalment – The monthly amount paid by the borrower in order to repay a bank loan. The monthly instalment includes a portion of the loan principal, together with the related interest, as well as applicable fees (for example: administration fee, life insurance).
- Base salary – The salary of an individual as stated in the employment record or individual employment contract.
- Net salary – The amount of money an individual receives after deductions from the gross salary, such as taxes, duties, various withholdings, and contributions.
- Gross salary – The base salary together with any permanent monthly allowances the individual is entitled to. If such allowances do not exist, the gross salary is equal to the base salary.
- Maturity date – The date on which the repayment term of a loan or an instalment expires. After this date, the lender may apply penalties. The amount of these penalties is specified in the credit agreement.
- Outstanding loan balance – The amount of money remaining to be repaid from a loan.
- Occasional allowances – Additional income earned by an individual on an occasional basis. Example: bonuses, night shift allowances, salary increases. Banking and/or non-banking financial institutions usually do not take these monetary benefits into account when calculating eligible net income.
- Permanent allowances – Income received regularly by an individual that contributes to the net salary. Permanent allowances are taken into account by banking institutions. Example: overtime, monthly or quarterly bonuses, and sales commissions.
- Eligible income – The amount of money considered by the bank as appropriate for a borrower to have the financial capacity to repay a specific loan. Each bank determines, based on the profile of the prospective borrower and the amount they wish to borrow, the income level that ensures the highest financial feasibility for repaying the loan in accordance with the credit agreement.
Financial Leasing | VAT-Free External Financing | Auto Loan | Operational Leasing
