Credit & banking glossary
The definitions used throughout the site, with official sources and related research.
8 of 8 definitions
- Annual percentage rate (APR)#
An annualized measure of borrowing cost. For installment loans it includes interest and certain required charges; a credit-card purchase APR does not include every fee. Compare products using the applicable disclosure rules.
- Basis point#
One hundredth of a percentage point. A move from 5.00% to 5.25% is a rise of 25 basis points, or 0.25 percentage points.
- Current expected credit losses (CECL)#
An accounting approach for estimating expected credit losses over the remaining contractual life of covered assets, considering prepayments. Estimates use historical experience, current conditions, and reasonable and supportable forecasts.
- Debt-to-income ratio (DTI)#
Monthly debt payments divided by gross monthly income. For example, $2,000 of debt payments and $6,000 of gross income give a DTI of about 33%. DTI does not by itself capture all living expenses or income volatility.
- Deposit beta#
The change in a deposit interest rate divided by the change in a reference rate over the same period. If the reference rate rises 1 percentage point and the deposit rate rises 0.4 points, the beta is 40%. The time window and deposit mix affect the result.
- Military annual percentage rate (MAPR)#
The Military Lending Act’s measure of credit cost for covered transactions. It can include credit insurance, certain add-on products and fees beyond the ordinary APR. Product-specific exclusions and rules matter.
- Risk-adjusted return on capital (RAROC)#
A measure that compares risk-adjusted earnings with capital allocated to the activity. Institutions differ in their treatment of expected losses, expenses and capital, so comparisons require consistent definitions.
- Secured Overnight Financing Rate (SOFR)#
A transaction-based measure of the cost of borrowing cash overnight against U.S. Treasury collateral. Overnight SOFR, compounded averages, and forward-looking term rates are different measures; a loan’s contract determines which applies.