Glossary

ABN (Australian Business Number)
A number issued by the Australian Tax Office (ATO) to registered businesses in Australia. This number must be displayed on official paperwork and transactions for tax purposes.

Account balance
See balance.

Account number
A unique number that the bank allocates to your account.

Accruals basis
Transactions that are recorded when there has been an actual exchange of goods or services. Also known as Invoice Basis.

Accrued interest
Interest that is owed, but isn't yet due to be charged or paid.

Acquisitions
Includes items an individual buys, such as goods, services or equipment, for their enterprise.

Additional repayments
Any money paid into a loan in addition to the prescribed minimum repayments.

Administration fee
A monthly fee that is charged for providing services and managing an account.

Advice
A recommendation or statement of opinion that may influence a person in making a decision to acquire, hold or dispose of a financial product.

Amortisation period
The time you have to repay a loan at the arranged terms.

Amount due
The amount of money that has to be paid on an outstanding account.

Application fee
A fee charged for setting up a loan.

APR (Annual Percentage Rate)
The rate at which interest is charged on money that is owed over a one year period. Interest is usually calculated daily and may be charged monthly, quarterly or annually.

Approval in principle
The loan is approved subject to the information provided on the application form being verified in the branch.

Arrears
The amount of money that has not been paid by its due date.

ASIC (Australian Securities and Investments Commission)
An Australian government body that regulates banks and other financial companies.

Asset (Secured)
An asset that has been provided by you to secure a loan.

ATO
The Australian Taxation Office.

Attribution
Rules which determine when a GST liability or an input tax credit entitlement arises in respect of a supply.

Automatic deduction
See direct debit.

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Balance (Final/Closing)
The amount of money in a bank account at the end of a certain period of time.

Balance sheet
An enterprise's statement of its assets, liabilities and net equity.

Balloon Payment
A large, lump-sum payment scheduled for repayment at the end of the loan term. A balloon payment may be included in the payment schedule for a loan, lease or a series of periodic payments.

Bankruptcy
A legal process affecting individuals who are unable to pay their debts. A bankrupt person gives control of most of the debts and assets to a bankruptcy trustee who then decides which assets (if any) can be sold to pay off the debts.

BAS (Business Activity Statement)
Used by businesses to report their tax entitlements and obligations, including the amount of GST they have received and paid.

Borrower
A person who has borrowed money from a bank or other lender. Also called a debtor.

BPAY®
A service that allows Australians to pay their bills using their credit cards or from their bank accounts using internet banking or phone banking. BPAY® is registered to BPAY Pty Ltd ABN 69 079 137 518.

Break costs
Charges for paying off a (generally fixed interest) loan before the end of its term.

Business purpose
The purpose of the facility is wholly or predominantly for business use.

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Capitalising (or capitalised) interest
Where interest owed is accrued and added to the total debt rather than being paid on a regular basis.

Cash basis
An accounting method in which transactions are recorded only once a payment or receipt of cash is made.

Chattels
Personal property. Real chattels are buildings and fixtures, personal chattels are clothes and furniture.

Co-borrower
An individual who borrows money jointly with you. Each individual is jointly and separately responsible for the repayment of the loan. Therefore, if one person does not pay the other person will be required to pay the full amount of the loan.

Comparison rate
Helps you identify the true cost of a loan. It takes into account the interest rate, loan set-up costs, the term of the loan, and any other up-front or ongoing fees associated with a loan.

Compound interest
Interest that is paid on both the accumulated interest as well as on the original principal.

Consumer
An individual who buys or uses products or services.

Consumer Credit Code
The law that regulates consumer lending transactions in Australia. Lenders such as banks are obliged to tell you what your rights and obligations are in any transaction. Credit transactions made predominately for business or investment purposes are not governed by the Consumer Credit Code.

Contract
A legally enforceable agreement.

Credit
Money that a lender gives a borrower based upon a promise to pay it back in the future. A person taking either secured or unsecured credit usually has to pay interest on the borrowed money plus fees and charges in addition to the principal payment.

Credit file
A file that is kept by a credit agency (such as Veda Credit Advantage) which shows your credit history. If you have failed to meet your repayment obligations in the past and defaulted on a loan or credit card, your credit file may show a 'default'. Defaults may make it difficult for you to borrow money from some lenders.

Credit rating
A 'credit rating' is a popular misconception. Rather than a rating, an individual's credit file shows their credit history including any defaults. Depending on a lender's finance approval criteria, one or more defaults may result in refusal to lend money.

Credit report
A report by an authorised credit reporting agency which details your credit history. A lender needs permission from you to obtain a credit report. Also known as a Credit Reference.

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Debit
Most commonly a withdrawal from a bank account.

Debt
An obligation by an individual or organisation to pay a specific amount of money to another individual or organisation.

Debtor
Someone who owes money. The opposite of creditor.

Default
Occurs when a person fails to meet the terms or requirements of a signed contract, such as not making scheduled repayments on a loan.

Default rate
The interest rate used when payments are not made or the facility goes above its limit.

Deferred establishment fee
May be charged when a loan is paid off before a set period has elapsed - within three years, for example.

Depreciation
The writing-down of the cost of an asset over its estimated life.

Direct debit
An electronic payment that is made directly from a bank account, usually at a specified time on a pre-requested date.

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Early termination charges
Fees incurred by paying off a loan early.

Encumbrance
An outstanding liability or charge on a property.

Equipment loan
A loan to finance purchase of a vehicle with a charge by way of a goods mortgage taken over the vehicle being purchased. Title to the vehicle is therefore in the name of the borrower that is providing the goods mortgage.

Equity
The difference between an asset's current market value and any debt or claim against it.

Expenses
Your everyday expenditure, such as food, transport, housing, clothing and entertainment.

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Financial Services Guide
Provides you with information to assist you in making an informed decision on whether you want to use the products or services of a financial services provider.

Finance Lease
A Finance Lease is a type of finance where most of the risks and benefits of vehicle ownership are transferred to the borrower (the lessee) although the financier (the lessor) still retains legal title. Rentals are fixed for the term of the agreement.

Financier
A professional who handles large-scale financial projects like investments, money-lending, and financing large projects.

Fixed interest
An interest rate that is set for an agreed term.

Fixed term loan
A loan that you must repay within a certain time.

Fringe Benefits Tax (FBT)
A Federal Tax payable by an employer on benefits provided to an employee where the benefit is not in the form of salary and wages. For example, the benefit is a right, privilege, service or facility including the use of a car owned by the employer.

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Government charges
These vary for each state and territory and include stamp duty and mortgage registration fees.

GST (Goods and Services Tax)
A tax levied on the supply of goods and services.

Guarantee
A legal contract accepting responsibility for discharging another's liabilities, such as the payment of a debt.

Guarantor
A party who has legally agreed to be responsible for the payment of another party's debts.

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Hire Purchase
A Hire Purchase agreement is a contract under which the vehicle, owned by the financier, is hired to another person upon payment of a fixed rental.

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Income
The total amount of money you earn, including wages, rental income, interest and government allowances. For a business or a company, income is revenue less expenses.

Input tax credit
When you pay GST on taxable supplies for use in your business, you can usually claim these amounts back from the ATO.

Input taxed supplies
Supplies which do not have any GST charged on them. The supplier is not entitled to input tax credits on these acquisitions.

Interest
The amount a lender charges a borrower for the use of the lender's money, or the amount earned through depositing funds with a financial institution in an interest bearing facility.

Interest adjustment
An adjustment sometimes made by banks or other financial institutions, which arises when a customer seeks to break a fixed term contract (either for a loan or a term deposit).

Interest in advance
When interest is charged at the beginning of a period of time. Generally only available for investment purposes on fixed rate loans.

Invoice
A bill that needs to be paid for products or services received.

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Joint debt
When two or more people borrow money or incur a debt together. Unless the contract limits the amount each party must pay, the lender can recover payment of the whole amount from either party.

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Legal entity
An individual or organisation that has the capacity to be held legally accountable such as an individual person, a corporate body or an incorporated body.

Lien
The right to use property as security for a debt or loan.

Liquidity
The measurement of how quickly and easily an asset can be converted into cash with no or minimal loss.

Loan
Money that is lent to a person for an agreed term. At the end of the term the money must be repaid, usually with added interest.

Loan agreement
A formal contract between a borrower and a lender which sets out the terms and conditions of the loan. Also known as a Facility Agreement.

Loan approval fee
A fee payable once a loan has been approved by a lender.

Loan maintenance fee
An ongoing management fee charged over the life of the loan. Normally charged monthly.

Low documentation loan
A loan generally for self-employed people who may not have the financial documents normally required to obtain a loan.

Lump sum payment
A single, usually large payment towards a loan in addition to your regular scheduled repayments.

Luxury car
The cost of the vehicle exceeds the 'luxury tax limit', currently $57,009, as determined by the Australian Tax Office (ATO).

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Maturity
The date a debt or investment must be paid in full.

Minimum repayment
The minimum amount required to be paid on an invoice or a loan.

Monthly service fee and monthly account fee
A fee which is charged each month to maintain your account and varies depending on the type of account.

Mortgage
The charge or assignment of property to secure the payment of a debt and where the property is redeemable upon payment.

Mortgage Stamp Duty
A State Government tax based on the dollar value of a mortgage.

Mortgagee
The lender of funds to buy property secured by a mortgage.

Mortgagor
The person borrowing money with a mortgage.

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Net worth
Simply put, this is the value of your assets less how much you owe on them.

Novated Lease
A Novated Lease is an agreement where an employer agrees to meet the repayments of a lease while the employee remains employed, such as a car lease. The employee then sacrifices part of their salary to cover the cost of the finance.

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Offer to purchase
A legal agreement specifying the price for the purchase of property or goods.

Option to buy
A legally binding document giving someone the right to buy something - usually within a specific period - at a specific price.

Original documents
Paperwork or documents that display original signatures and have not been reproduced, i.e. not photocopied or faxed.

Overdue
An amount of money that has not been paid by the due date and is still outstanding.

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PAYG (Pay As You Go)
A system for reporting and withholding amounts of money for income tax purposes. If you have employees, you're required to withhold tax from payments you make to them.

Personal loan
A type of loan that is used for purchases like a car, boat or a holiday. Money is lent to you for a fixed period, at a variable or fixed rate of interest and repayments are calculated at the start of the loan.

Pre-approval
A process which provides an initial estimate of how much can be borrowed based on information supplied to the bank. Also known as Approval in Principle.

Prepayment
Additional payment(s) made under a loan that are over and above the payments specified under the loan contract.

Principal
The amount of capital deposited or borrowed, upon which interest is paid or charged.

Principal and interest loan
A loan where the principal and the interest are repaid together for the term of the loan.

Private sale
A Private Sale is where property is sold directly by the owners, not through a licensed dealer.

Product Disclosure Statement (PDS)
A document (or group of documents) which describes a financial product or service, including the features, benefits, cost and associated risks.

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Rebate
An amount of money that is returned or refunded.

Records
Financial documents and paperwork.

Refinancing
Refinance by replacing, restructuring or adding to an existing loan to obtain a lower interest rate, consolidate debts or lengthen maturities etc.

Registered entity
An entity that is registered for GST.

Repayment
Money paid by a borrower to a lender. Principal and interest repayments include both the interest due and a component of the principal amount borrowed.

Repossession
Occurs when a borrower cannot repay a loan and the lender takes possession of any assets or investments that have been provided as security.

Residual value
The estimated value of the leased vehicle at the end of the lease term.

Risk
Exposure to the chance of loss when investing over time. Lower risks are normally associated with lower returns.

Risk profile
The amount of risk you are prepared to take for the prospect of earning a higher return.

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Salary Packaging
Salary packaging is an option available with some employers, where the employee can choose to forego a portion of their salary in return for the employer providing them benefits of a similar value.

Savings
Money that is set aside for use at a later time. See term deposit.

Secured loan
A loan where an asset (such as a car) is offered by the borrower to the lender as security on the loan. The lender can take possession of the asset if the borrower defaults and sell it to recover the costs of the loan. If there is a shortfall after sale of the asset, the borrower is required to pay the lender the outstanding loan amount, including interest, fees and charges.

Security
An asset - usually the property or goods purchased with the loan funds - that can be sold by a lender if the debt is not repaid in full.

Servicing
Meeting principal, interest and other payments on a loan.

Settlement date
The date when the new owner makes a final payment and takes possession of the property or goods.

Shareholder
Someone who provides a portion of a company's capital and then receives a share of the company's profit in the form of dividends.

SOA (Statement of Advice)
Your formal record of the products and/or services we recommend to you, based on our understanding of your needs, objectives and financial circumstances.

Stamp Duty
A Government charge on certain financial transactions. For example, stamp duty is payable by the buyer on a transfer of land when a property is sold. The amount varies for each state and territory.

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Tax File Number (TFN)
A nine digit number issued by the Australian Taxation Office to Australian residents and registered companies to identify them for taxation purposes.

Tax invoice
A document issued by a supplier showing a price and the amount of GST (if any). It must include the supplier's ABN.

Tax period
An accounting period of one or three months (depending on annual turnover) which applies to GST and Business Activity Statements. Quarterly tax periods end on 31 March, 30 June, 30 September and 31 December. Monthly tax periods end on the final day of each month.

Taxable supplies
Include most goods and services sold by an enterprise. However, GST-free or input taxed supplies are not taxable.

Term
A period of time, such as the time in which a loan must be repaid.

Terms and conditions
Details which outline specific obligations of each party with regards to a contract, transaction or product.

Transactions
Movements of money, such as deposits, withdrawals or transferring between accounts.

Transfer
A document confirming a change of ownership.

Trust
An entity created to hold assets for the benefit of certain individuals or groups and managed by a trustee.

Trust account
An account usually used by professionals such as lawyers, accountants and stockbrokers to manage their clients' money.

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Unencumbered
A property free of liabilities, encumbrances or restrictions.

Unsecured loan
A loan where the borrower does not offer security to the lender.

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Variable interest
Where the interest rate may go up and/or down during the term of the loan.

Variable interest rate
A rate that generally goes up and down according to the fluctuations in market rates.

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