Loan Servicing for Small Business Lending Flashcards
What are the two primary stages in the life of a small business loan?
Loan origination and loan servicing.
Why do lenders assess a borrower’s credit worthiness?
To mitigate the risk of loan default.
Who is typically listed as the borrower in a small business loan?
The business name.
When does a small business loan become delinquent?
The day after a payment is missed.
What is a problem loan?
A loan with payments past due for 90 days or more.
What is the main goal when contacting delinquent borrowers?
To resume scheduled loan payments.
What is a grace period?
An allowance for a borrower to make up missed payments.
What is an automatic loan payment?
Scheduled automatic debits from borrower’s account by lender.
What is bankruptcy?
Legal process allowing borrower to discard or repay debt.
What is collateral in loan servicing?
Assets accepted by lender as security for a loan.
What is a DDA (Demand Deposit Account)?
Checking or savings account allowing withdrawals without notice.
What does it mean when a loan is in default?
Failure to repay loan as per terms agreed.
What is deferment in loan terms?
Temporary period where borrower isn’t required to pay principal (where interest may or may not accrue).
What does delinquent mean in loan servicing?
A loan with missed payments until borrower catches up.
What is the Dodd-Frank Act?
Law prohibiting unfair, deceptive, or abusive practices in finance.
What is the Fair Debt Collection Practices Act (FDCPA)?
The main federal law that governs debt collection practices. The FDCPA prohibits debt collection companies for using abusive unfair or deceptive practices to collect debts from you.
What is forbearance in loan servicing?
Temporary postponement of payments where interest accrues.
What is foreclosure?
Legal process allowing lender to claim assets securing a loan.
What is a grace period?
A period allowing borrower to defer or extend payment due date.
Who is a guarantor?
Person who guarantees loan repayment if borrower defaults.
What is a loan term?
Length of time borrower has to repay the loan.
What is refinancing?
Process of revising loan terms for a new, favorable contract.
What is a UDAAP?
Unfair, deceptive, or abusive act or practice.
What is Principal
The principal of a loan is the original amount of money borrowed, excluding interest and fees.
It represents the base amount that must be repaid over time, with interest typically calculated based on this sum.
What is a Loan Guarantee
A legally binding agreement where a third party, known as the guarantor, agrees to pay back a loan if the borrower defaults.
