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Glossary

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Glossary

We've organized the most common financial terms and explained them in simple, friendly ways.

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Paramedical Exam

The health exam that is typically required for an applicant to qualify for certain types of life insurance. While the exam determines what classification (or rating) a policyholder would fall under, it is not required for all policies. 

Peer-to-Peer Lending

Also known as "crowd lending," a process in which individual investors, not banks, fund loans. Peer-to-peer lending allows online lenders to offer personal loans and other consumer lending products through a seamless online process, eliminating the need to visit a local bank or credit bureau, while also cutting out excess paperwork and long waiting periods.

Personal Injury Protection (PIP)

A more comprehensive version of Medical Payments Coverage (MP) auto insurance, which, in addition to covering bodily injury, can also cover claims for lost wages, physical therapy, etc. 

Policy Owner

The individual who has ownership over an active life insurance policy, which may or may not be the insured under the policy.

Pre-Approved/Pre-Qualified

Varying on the provider and financial product in question (e.g., mortgage, personal loan, credit card), pre-approval and/or pre-qualification are both indicators providers use to determine the likelihood an applicant will ultimately be approved for a financial product (as well as the loan amount, rate, and other offer details) based on the applicant meeting certain underwriting criteria.

Premium

The payment made by the policy holder to the insurance company for their insurance policy. Can be paid monthly, quarterly, semi-annual, or annually.

Prepayment Penalty

Typical of a mortgage or auto loan, a fee that some lenders will charge if a borrower pays off their loan too quickly, based on the terms of the loan agreement, as a method for lenders to collect lost interest.

Principal

With a loan, this the amount paid back to a lender that equates to the actual amount borrowed, excluding all interest and associated costs/fees.

Private Mortgage Insurance (PMI)

For anyone taking out a conventional mortgage (fixed-rate or ARM) and putting down less than 20% for their down payment, private mortgage insurance (PMI) will be required by the lender. The lower the down payment amount, the higher the PMI rate will usually be.