SHARES:

All Share Index A weighted average of the market prices of all shares listed on the Johannesburg Stock Exchange. The index gives the best indication of general market direction because it includes shares from all sectors of the stock market.

Asking Price The latest offer price of a share.

At the close The time stock market trade ceases in the afternoon every day.

At the open The time the market opens for the current day's trade.

Bear market A period of time during which the markets display continued weakness.

Benchmark A market indicator against which you can measure the comparative performance of another investment vehicle. For instance, unit trust returns are usually judged relative to the performance of a stock market index.

Bid price The selling price of a share. The bid price is usually lower than the asking price.

Bonds Government, local authorities and companies issue bonds to fund their expenditure. They usually offer investors a bi-annual fixed or variable coupon for the life of the bond. At maturity the investor receives a principal payment.

The bond, also known as a fixed income security, is guaranteed by government or, in the case of corporate bonds, is assigned a rating that quantifies the level of risk of non-payment.

Bull market A period of prolonged market strength.

Call A call option on a block of shares gives the owner the right (but not the obligation) to buy the shares at a specific point in time (the maturity date).

It is a type of derivative because, for the life of the instrument, the value of the option is derived from an underlying share.

The price the investor will have to pay for the shares at maturity is the known as the strike price of the option. The investor can either buy the underlying shares when the option expires or can sell it in the secondary market before maturity at the prevailing market price.

Capitalisation The market value of a company calculated by multiplying the number of shares by the current share price.

Correction A sharp move, upwards or downwards, in stock market valuations.

Coupon rate The interest paid on a regular basis to a bond holder.

Cyclical shares Shares of companies whose performance are strictly dependent on the business cycle. When the economy is steaming ahead, cyclical shares perform well. In contrast, an economic downturn will affect the shares adversely.

Debenture A debt instrument usually issued by corporates. It is repayable at a future date and pays the investor a fixed interest rate. The obligation is secured against the company assets. Debenture holders are paid before the company issues dividends.

Derivative A financial contract where the value is derived from an underlying security or index. It is an agreement by the investor to buy or sell the underlying asset in the future at a set price. The value of the derivative is based on the anticipated future movements in the stock price. Derivatives either trade on a formal exchange or over-the-counter between parties in an unregulated transaction.

Dividend The distribution of part of the earnings of a company to its shareholders after the company has decided how much income to retain and plough back into the company. A dividend is usually expressed as an amount (in cents) per share.

Earnings per share (EPS) A company's earnings built up during a reporting period. Interim earnings are paid after six months and a final dividend is paid at the end of a financial year. Their value is calculated by dividing the after-tax income earned during the period divided by the number of ordinary shares in issue.

Equities The ordinary shares listed on a stock exchange by a publicly quoted company.

Exchange rate The value of one currency against another. Market sentiment and certain economic fundamentals such as the difference between the two countries' inflation and interest rates determine the level.

Ex-dividend The date after which an investor will not receive a dividend payment.

Float The number of shares publicly available to be traded.

Future A contract to buy or sell a fixed number of commodities, currencies or shares at a fixed future date and price. The contract can be traded on a formal exchange or in the over-the-counter, unregulated market.

Gilt A bond or security issued by the government with a fixed or variable rate of interest.

Goodwill The difference between the market value of a company and the value of the company's physical assets.

Holding Company A corporation that owns a controlling interest (above 50%) in another company.

Initial Public Offering (IPO) The process leading up to the listing of a company's shares on the stock exchange for the first time. Also known as flotation or going public.

Insider Trading Dealing in shares based on privileged information that has not been made available to the rest of the shareholders in the company and is likely to materially influence the share price. It is an illegal practice and, if an investor is found guilty of insider trader, carries a hefty fine or jail sentence.

Margin Money or securities deposited with a stockbroker and used as collateral to cover any potential losses made on investments. A broker makes a margin call to increase the funds in the account if the market moves adversely against the investor's shareholding.

Market Cap Same as a company's capitalisation. The market cap is calculated by multiplying the amount of shares by the current selling price.

Maturity The date at which the principal owed on a debt instrument is due for final and complete payment.

Money Market The wholesale funding market banks use to raise or lend money to balance their retail assets and liabilities. Money market instruments are relatively short-term in nature (maturity of one year or less) and include certificates of deposit, treasury bills and other types of interbank funding.

Net Asset Value The net value of a company after total assets have been set off against total liabilities.

Odd Lot A block of less than 100 shares. Brokers often charge a premium price on trades in odd lots.

Option The right, but not the obligation, to buy (a call option) or sell (a put option) a predetermined quantity of shares or other investments at a specified price (the strike price) during a specified period of time. Options usually expire on a specific day each month.

Over-the-counter (OTC) Trade in securities not listed on an official exchange and thus unregulated by a governing body. The agreements are struck between two parties and the terms of the deal are more flexible than exchange-traded securities.

Portfolio A spread of investments across the full range of financial vehicles, including cash, fixed income and shares.

Preference Share A share in a listed company that pays the holder a fixed rate of interest rather than a dividend. Preference shareholders are also paid out first if a company is liquidated.

Price/earnings Ratio (P/E Ratio) The market price of a share divided by the earnings per share. It is a popular measure of the market's rating of the specific counter. The higher it is the more confidence the market has invested in the company and vice versa.

Private Placement The company sells its shares directly to institutional investors such as brokers, banks, unit trusts, insurance companies and pension funds prior to the public placing of shares on the stock market.

Prospectus A legal document stipulating the history, financial standing and objectives of a company or a unit trust before the company lists or the fund launches

Put A put gives an option contract holder the right to sell a number of shares at a specified price when the option expires.

Real Rate of Return The inflation-adjusted return of an asset.

The measure strips out the increase in prices to reflect the actual increase in the assets value for the period.

Record Date Date a share must be registered in an investor's name to qualify for a dividend payment.

Resistance A higher price level that a share or other financial instrument has tested recently but failed to break through.

Return Gain or loss made on an investment for a specified period.

Rights issue New shares issued and sold by a company to raise fresh capital.

Security Financial instruments such as stocks, bonds, treasuries and debentures. Debt or equity instruments issued by a company, the government or any other institution to investors.

Settlement Date Date at which the sale or purchase transactions of securities must be settled. The JSE has a T+5 settlement period, which means that the investor must pay for the shares within five days after concluding the trade.

Share Individual or institution's stake in a listed company giving them the right to participate in a defined portion of the company's profits. Most shares have voting rights attached to them and are traded on the stock exchange.

Share Code Each share listed on the JSE has a three letter code that is an abbreviation of the company's name. For example, the code for Anglo American Corporation is AAC.

Share price The cash value of a share at any given time.

Stock or Share Split A division of shares in a company to increase the total number of shares in issue. The value of each share is reduced by the multiple of the split. For example, if a share with a market price of R100 splits two-for-one, the price of the share drops to R50. Investors are given twice as many shares so that the value of the original investment of each shareholder doesn't change.

Support Levels A price level below which a declining equity or currency is not expected to fall through easily.

Treasuries Debt securities issued by the government to fund its debt bill.

Volatility Unusually large price movements in markets or shares.

Volume Daily number of shares, bonds or currency units traded.

Warrant A derivative that gives an investor the right to buy shares at a fixed price at a pre-determined time in the future.

Yield Income from an investment (usually annually) expressed as a percentage of the price. For shares, the yield is the annual dividend divided by the purchase price. For bonds, it is the coupon rate divided by the market price.

UNIT TRUSTS

Active management An investment approach that relies on independent investment judgements and active portfolio changes by fund managers to achieve growth in returns. In contrast, passive management occurs when a manager's main aim is to mirror market performance by replicating the composition of market indices.

All Share Index A weighted average of the market prices of all shares listed on the Johannesburg Stock Exchange (JSE). The index gives the best indication of general market direction because it includes shares from all sectors of the stock market.

Ask Selling price of a unit in a unit trust at any point in time.

Asset allocation A spread of investments across the full range of financial vehicles, including cash, fixed income and shares. The fund manager decides on the percentage of the funds that will be devoted to each type of asset. This mix will change in line with market conditions and to reflect the risk profile of the fund or investor.

Asset Swap A foreign exchange control requirement established by the SA Reserve Bank to allow fund managers to invest a portion of their funds under management offshore without triggering capital outflows. The local institution is allowed to swap a portfolio of domestic investments with a foreign party up to a certain limit. The foreign party is supposed to hold onto the securities for an agreed period to prevent money flowing out of the country during the fund manager's asset diversification.

Average Annual Compound Return The average of all the annual rates of return, including reinvestment of distributions, earned over a specific period of time.

Benchmark A market indicator against which you can measure the comparative performance of another investment vehicle. For instance, unit trust returns are usually judged relative to the performance of a stock market index.

Bid price Sell price of a unit in a unit trust fund.

Bid/Offer spread Difference between the price at which an investor buys an investment (offer price) and the lower price (bid) at which it is sold.

Bonds Government, local authorities and companies issue bonds to fund their expenditure. They usually offer investors a bi-annual fixed or variable coupon for the life of the bond. At maturity the investor receives a principal payment. The bond, also known as a fixed income security, is guaranteed by government or, in the case of corporate bonds, is assigned a rating that quantifies the level of risk

Diversification Strategy of spreading investments across a number of different types of assets, stocks and share sectors to reduce the risk of being exposed to any one asset's investment performance.

Derivative A financial contract where the value is derived from an underlying security or index. It is an agreement by the investor to buy or sell the underlying asset in the future at a set price. The value of the derivative is based on the anticipated future movements in the stock price. Derivatives either trade on a formal exchange or over-the-counter between parties in an unregulated transaction.

Fixed-income Fund A specialist unit trust invested in bonds and other fixed-income instruments.

Fund Another name for a unit trust

Growth Fund A unit trust with a strategy of concentrating on delivering capital growth by investing in companies with a history of fast-growing profits and relatively higher price-to-earnings ratios. Growth funds are traditionally more volatile than other unit trusts.

Hedging A strategy aimed at countering and protecting an investment against adverse movements in prices, interest rates or exchange rates. It usually involves taking the opposite position in the derivatives market by, for instance, selling Anglo call warrants or options (or buying puts) to limit the impact of a fall in the conglomerate's share price on the actual investment in Anglo shares.

Income Distribution Any income, including dividends and interest earned by the unit trust. The proceeds are either paid out to unit holders or reinvested in the fund.

International Unit Trust A unit trust with a significant exposure to non-South African assets.

Investment Objective Defines the fund manager's investment goals and gives an indication of where the money will be invested. It gives the investor the security of knowing his money will be invested as spelt out by the management company.

Linked Product Company Companies that invest in a number of unit trusts on an investor's behalf in return for an ongoing administration fee. Investors can switch their investments between different unit trusts for a small charge. Linked product companies demand relatively large minimum investment amounts.

Liquidity Amount of cash held by a unit trust and its ability to buy or sell any of the shares in the fund portfolio. Unit trust regulations dictate that a specific percentage of a unit trust's asset should always remain in cash.

Money Market Wholesale funding market the banks use to raise or lend money to balance their retail assets and liabilities. Money market instruments are relatively short-term in nature (maturity of one year or less) and include certificates of deposit, treasury bills and other types of interbank funding.

Net Asset Value (NAV) The market value of a unit trust's total assets (stocks and shares plus income less expenses) divided by the number of units. The NAV of a unit trust is usually calculated daily.

Offer price The purchase price of a unit trust.

Portfolio Investment Investments in financial assets (including shares, government bonds etc.) rather than fixed physical assets.

Prospectus A legal document stipulating the history, financial standing and objectives of a company or a unit trust as well as background on the fund managers and any other pertinent financial information.

Real Rate of Return The inflation-adjusted return of an asset.

The measure strips out the increase in prices to reflect the actual increase in the assets value for the period.

Securities Financial instruments such as stocks, bonds, treasuries and debentures. Any debt or equity instrument issued by a company, the government or other institution to investors.

Spot markets Markets where currencies or commodities are traded for immediate delivery.

Unit A unit trust is divided up into saleable units. To calculate the value of a unit, the investment proceeds of a unit trust are divided by the number of units.

Treasuries Debt securities issued by the government.

Unit Trust Linked Products A range of financial products with unit trusts as the main underlying investment. Investors can usually switch between various unit trusts.

Value Unit Trusts Value funds invest in shares that are considered undervalued compared to the rest of the market.

Unit trusts Collective investment vehicles divided into equal units. Money earned from the sale of units in these funds is invested in securities such as stocks and bonds.

Warrant A contract that gives an investor the right to buy shares at a fixed price at a pre-determined time in the future.

Accidental Death and Dismemberment Benefit A provision added to a life assurance policy that covers the financial needs of the insured, and his family, in the event of accidental death or if the insured severs a limb above the wrist or ankle joint or loses his or her eyesight.

Agent Sales representative of a life assurance company.

Beneficiary The individual who will receive the proceeds of a life assurance policy. The primary beneficiary is the person who will be first entitled to the proceeds. Secondary beneficiaries get the proceeds if the primary beneficiary is dead and tertiary beneficiaries are entitled to proceeds if there are no primary or secondary beneficiaries alive when the insured dies.

Cash Surrender Value The cash amount available when a life assurance policy is voluntary terminated by death or maturity before it becomes due.

Cash Value The money value accumulated in a life assurance policy.

Commission A percentage of the policy paid to an agent by the life assurance company.

Contingent Beneficiary One or more people who will receive the proceeds when the policy matures and the original beneficiary is not alive.

Disability When an individual is unable to perform all, or part, of their job because of an accident or illness. A disability benefit is a provision that is usually added to a life assurance policy.

Double indemnity A provision in a life assurance policy that allows for the payment of a sum twice the amount of the original benefit if the insured dies in an accident.

Endowment policy A life assurance and savings policy that pays out an amount at the end of a specified term or when the person insured dies.

Exclusions Specified risks listed in a policy for which benefits will not be paid.

Grace Period A specified period of time (usually about a month) after a premium is due during which the policy remains in force.

Group Insurance Life and disability policies arranged by employers for their workers and dependents. The insured employees are covered by a single policy taken out by the employer. Life assurance groups determine how many claims they expect from the group and on a collective premium.

Independent Financial Adviser (IFA) A personal finance adviser who should be committed to offer the best advice for a client on investments and financial products. Legislation is being drawn up to ensure these advisers become legally accountable for the advice they give.

Insurer The party that provides insurance coverage.

Lapsed Life Assurance Policy When a policyholder stops paying premiums before a policy has taken on a value, the policy lapses and no money will be refunded. A policy acquires a value once all the costs of issuing the policy have been met. This can take up to two years of paying premiums, depending on the terms of the policy.

Level Premium Insurance A policy with unchanging premiums for the entire duration of the policy. In the first years of the policy the premium amount is higher than needed for the coverage required, but in the later years the sum reduces.

Life assurance A life assurance policy pays out money to the family of a policyholder after his or her death.

Lump sum A single cash payment to the policyholder.

Medical A doctor's report on the medical condition of a potential policyholder.

Mortality The average life expectancy of a given gender, population or age group.

Paid-up Insurance A life assurance policy with all the premiums paid up.

Premium Recurrent monthly payments into an insurance policy.

Proceeds Net amount of money payable by the life assurance group when an insured person dies or the policy matures.

Reinstatement Securing the continuation of a lapsed policy by paying up all unpaid premiums and producing satisfactory evidence of insurability.

Renewable Term Insurance Renewable term insurance provides the right to renew the policy at the end of the term for another term or terms. The rates increase every time there is a renewal as the insured ages.

Rider Any clause added to a policy. A rider includes the expansion of a policy's conditions or the exclusion of a condition. A rider is also called an endorsement.

Self-insurance An individual strategy to provide for the risk of future losses by compiling funds through investments, as opposed to purchasing life assurance policies and other insurance protection.

Single Premium Life Cover A life assurance policy with an initial premium, which, together with interest earnings, is sufficient to pay the cost of the whole policy.

Term Length of time covered by a policy.

Term Insurance A type of policy that only offers coverage for a limited term (usually 10, 15 or 20 years). If the insured does not die in this time, the policy ends and no payment is made. A term insurance policy is usually cheaper than other types of life assurance policies.

Underwriter A company that receives premiums from policyholders and is responsible for the implementation of a policy contract.

Universal Life A life assurance policy with flexible premiums. Policyholders may change the death benefits from time to time and alter the premium payments.

Variable Life Assurance A life assurance policy with no fixed benefits. The amount paid out depends on the value of the policy's assets at the time the benefit is due.

Waiver of Premium A provision that exempts the insured from paying premiums over a specific period in case of disability after an accident or because of an illness.

Whole Life Insurance Not limited to a specific time frame and will pay out whenever the insured dies.

INSURANCE

Broker The insured person's representative in negotiating and securing insurance. Not ordinarily an agent for an insurance company but places orders with insurance companies.

Claim A demand submitted to an insurance company requesting payment of an amount due under the terms of a policy.

Commission A percentage of the premium paid to an agent or broker by the insurer.

Comprehensive Insurance A term used for a variety of policies providing broad protection.

Comprehensive Automobile Liability Insurance An insurance policy designed to provide cover for a variety of vehicle risk liabilities including bodily injury and property damage.

Comprehensive Personal Liability Insurance A policy that provides compensation if the insured injures others.

Insured Party that the insurer agrees to compensate for losses.

Lapsed Insurance Policy The cancellation of insurance due to the failure of the insured to pay premiums regulary. None of the money already paid will be reimbursed if the policy lapses before all costs, including commission to agents, are met.

Lump Sum A single cash payment.

Non-forfeiture Option Option which allows for the value of a policy to be paid out when the insured defaults on payments. The value of the policy is payable either in cash or some another form of insurance.

Self-insurance Individual strategy to provide for risks by compiling funds through investments for future losses, as opposed to purchasing insurance.

RETIREMENT ANNUITIES

Annuitant The person who is covered by an annuity and who will usually receive the benefits from the annuity.

Annuity An investment that provides an income at regular intervals for a specific period of time. The income investors earn from annuities is free from taxation until the investor starts to access the funds.

Annuity (With Period) Certain An annuity that pays out regular sums throughout the life of the insured, but also guarantees to pay income for a specific number of years regardless of whether the insured lives or dies. If the insured dies before the period has lapsed income payments are made to the estate or a nominated beneficiary.

Beneficiary The person guaranteed to receive an annuity payment.

Deferred Annuity Income payments only start at some time in the future. The payments begin after a specified number of years or at a specified age.

Escalating Annuity An annuity that allows an investor to specify a fixed percentage annual increase in his or her income payments.

Joint and Survivorship Annuity Usually two annuitants, generally a married couple, take out the policy. The annuity pays out income until the death of the surviving annuitant. A joint annuity can be structured to suit different needs. The annuitants can choose to have the income payment reduced on either the first death, or either of the two deaths.

Life or Living Annuity An annuity that leaves any capital that has not been spent for the investor's estate. The investor can also decide where the underlying capital should be invested, such as in unit trusts. The policyholder lives off a certain self-defined percentage of the capital every year.

Phased retirement Buying annuities with small portions of a personal pension, rather than buying one annuity with the entire pension fund.

Retirement Annuity A retirement saving tool which pays out regular sums to the investor as a pension after retirement.

Single Life Annuity An annuity that pays out a guaranteed amount for a fixed term to the retiree or, if he/she dies in this time, to a beneficiary. If the annuitant is still alive after the fixed term, regular payments will be made for the rest of his/her life.

Variable annuity An annuity policy that according to which the amount of each periodic payment differs according to the performance of the underlying investments, usually unit trusts, as opposed to a fixed annuity, which pays out a fixed amount for the duration of the contract.

HEALTH INSURANCE

Critical Illness Insurance A policy that pays out a lump sum if the holder is diagnosed with a serious medical condition.

Health Insurance Insurance against loss because of ill health or accidental bodily injury.

Insured Individual that the insurer agrees to compensate for losses.

Insurer Party that provides insurance coverage.

Lapse Cancellation of insurance due to the insured's failure to make premium payments.

Managed Care Health Plans Medical schemes that offer the investor a network of suppliers you can go to for a fixed monthly cost. Managed care schemes negotiate deals with the service suppliers.

New Generation Medical Scheme Schemes that combine long-term medical insurance with day-to-day medical expenses. A portion of scheme members' premiums goes toward insurance for expensive medical treatment. The other part is paid into a savings account, which is used to pay expenses for doctor visits and medicine. Some schemes allow members to withdraw unspent contributions in the savings accounts.

PERSONAL LOANS

Accrued Interest Interest that accumulates on a loan and has be to paid back at a later time, usually when the principal is due, rather than being paid during the life of the loan. Accrued interest may be compounded, where the interest is paid on interest, or simple interest.

Adjustment interval The regularity with which the interest rate on a loan can be changed.

Amortisation The process of paying back a loan in installments. During the first few years, the bulk of the installment goes towards paying off the interest owed.

Balloon Payment Usually a short-term fixed-rate loan, which involves small payments for a period and one large payment at a specified time to settle the outstanding principal.

Basis Point One one-hundredth of a percent (.01%). Changes in interest rates are often quoted in basis points.

Borrower A person that obtains funds from a lender for a period of time and pays an interest rate for the money.

Collateral An asset or assets offered as security for a loan in the event that there is a default. Banks do not always require collateral for all loans.

Default Failure to make payments on time. Default can lead to foreclosure.

Deferred Interest The delay of interest payments while a borrower is unemployed or has income problems.

Discretionary Income Income left to a person or family after all other fixed financial obligations have been met.

Fixed Interest A rate of interest that is set at the time a loan is negotiated and remains constant during the life of the loan.

Interest Rate The charge - expressed as a percentage - for making use of credit facilities. A 17% annual interest charge means that an amount equal to 17% of the amount borrowed will be charged each year by the lender as a lending fee.

Lender Institution that lends out money on the condition that it will be paid back with interest.

Overdraft A short-term loan agreement with a bank to cover unexpected expenses. The lender is charged a premium interest rate for the facility.

Prime rate Fluctuating interest rate banks charge to their best customers.

Principal Amount of debt, excluding interest obligations, left on a loan.

Repayment Schedule A plan that sets out the amount due in each payment period, the number of payments required to pay back the loan in full, and the due date of each payment.

Repossession The action of retrieving the assets of a borrower after the non-payment of agreed installments.

Simple Interest Interest calculated only on the original amount of the loan.

Variable Interest The rate of interest that changes on a regular basis during the life of a loan and is generally tied to the Reserve Bank's repo rate.

HOME LOANS

Accrued Interest Interest that accumulates on a loan and has be to paid back at a later date, usually when the principal is due, rather than being paid from the time the loan is made. Accrued interest may be compounded, with interest charged on interest, or a simple rate on the value of the original loan.

Adjustable Rate Mortgage A mortgage with an interest rate that can be adjusted as the prime rate changes. (Also known as a variable rate mortgage.)

Agreement of Sale The legal contract between the buyer and seller of a property including the sale price, settlement date and all other conditions.

Appraisal A professional assessment of the market value of a property.

Appreciation The capital increase in value of an asset.

Amortisation The process of paying back a loan in installments. During the first few years, the biggest part of the installment goes towards paying off the interest owed.

Amortisation Schedule Timetable for payment of a mortgage.

Balloon Mortgage A mortgage with a fixed interest rate for installments over a specific term and one large last payment at the end of the term to settle the outstanding amount of the principal.

Basis Point One one-hundredth of a percent (.01%). Changes in interest rates are often quoted in basis points.

Buy-down When the lender and/or the home builder subsidises the mortgage by lowering the interest rate during the first few years of the loan. The payments are initially low, but increase when the subsidy expires.

Cap Limit on how much the interest rate on an adjustable rate mortgage can change in a year and/or the life of the loan.

Closing Signing off on all loan documents.

Closing Costs Fees paid when purchasing a property, including attorneys' fees, fees for preparing and filing a mortgage, taxes, escrow payments, title search and insurance. These expenses are usually paid on the day the title to the property is formally transferred from the seller to the buyer.

Commission Broker's fee for facilitating the transaction, usually expressed as a percentage of the total paid by the buyer.

Conditional Sale An installment type mortgage, where the buyer moves onto the property, but the title of the property remains with the seller until full payments are made.

Credit Report An investigation into a person's credit history by a credit bureau. The report is used by the lender to determine if a loan applicant has a good credit standing.

Debt-to-income Ratio A calculation based on an individual's monthly income to determine how much debt a potential borrower can take on.

Deed A legal document transferring the ownership or title of a property from one owner to another.

Default Failure to make payments on time. This can lead to the loan's foreclosure.

Down Payment A sum (the difference between the purchase price and the portion of the price that is financed) usually paid by a buyer out of his/her own pocket.

Equity The difference between the appraisal of a property and the outstanding mortgage payments.

Escrow The part of a homeowners' monthly mortgage payment that is held by the lender to pay taxes, mortgage insurance and other recurring charges against the property. Escrow payments are also known as reserves.

Finance Charge The total amount your loan will cost you. It includes all interest paid on the loan as well as the purchase sum, but excludes closing costs.

Fixed Rate An interest rate that is negotiated upfront and does not vary throughout a loan term.

Foreclosure The legal action that can follow defaulting. The lender ends all the borrower's rights to the mortgaged property. Foreclosure usually involves the forced sale of a property at public auction with the proceeds of the sale going towards debt owed.

Interest Rate The charge - expressed as a percentage - for making use of credit. A 17% interest charge means that an amount equal to 17% of the amount borrowed will be charged each year by the lender as a lending fee.

Lock-in A written agreement guaranteeing the home buyer a specified interest rate provided that the loan is formalised within an agreed period of time.

Offer to Purchase A document that contains the price and terms under which a buyer is willing to buy a property.

Owner Financing A transaction that requires the seller to supply all or a part of the financing to the buyer.

Mortgage A legal agreement that pledges a property to the lender as security for payment of a debt.

Mortgage Life Insurance A policy that covers the declining balance of a mortgage loan and is payable on the death of a borrower.

Net The cash value after taxes have been taken into account.

Note of Default An official notice to a borrower that an individual has defaulted on his/her loan and that legal action will be taken.

Per Diem Interest A condition which states that the buyer will have to pay interest from the date of closing to the end of the month, depending on the day of the month the deal is finalised. The first home loan payment is usually due on the first of the following month.

Principal The amount of debt, excluding interest, left on a mortgage.

Prime Rate The interest rate banks offer to their best customers when securing a loan.

Refinancing Securing a new loan in order to pay off the existing mortgage.

Second Mortgage A second home loan taken out on a property. The second loan is always subordinate to the first and should the borrower default, the first mortgage has to be paid off with the proceeds of the foreclosure first.

Title Documented proof of the possession of a property.

Title Insurance Insurance to protect the lender or the buyer against losses arising from disputes over ownership of a property.

Title Search An investigation into the history of ownership of a property to check for unpaid claims, restrictions or other problems to prove that the seller can transfer ownership without any complications.

Underwriter A company or person responsible for issuing a mortgage.

Variable Rate An interest rate that changes periodically in relation to the prime rate. Also known as an Adjustable Rate.

VEHICLE FINANCING

Balloon Loan A loan with a fixed interest rate for installments over a specific term and one large last payment at the end of the term to settle the outstanding amount of the principal.

Basis Point One one-hundredth of a percent (.01%). Changes in interest rates are often quoted in basis points.

Capitalized Cost Lease price together with administrative costs and other items included in the lease contract such as insurance.

Comprehensive Vehicle Insurance Broad insurance that will pay out a vehicle's current market value in case of theft, accident or fire as well as damage to other vehicles involved in an accident.

Deposit A sum paid by the buyer of the vehicle as part of the purchase agreement. The bigger the deposit put down, the lower the loan amount. Financiers sometimes require a minimum deposit.

Depreciation The declining value of assets over time.

Guaranteed Option to Purchase The option in a lease agreement to buy a vehicle after the lease term expires. The price is generally decided on as part of the lease agreement.

Installment Sale An agreement between a buyer and a seller according to which the seller agrees to sell a vehicle to the buyer and be repaid for it over a period of time. The seller will usually charge interest on the amount left on the original price that still needs to be paid. Businesses can usually deduct the interest paid on an installment sale for tax purposes.

Interest Rate The charge - expressed as a percentage - for making use of credit. A 17% interest charge means that an amount equal to 17% of the amount borrowed will be charged each year by the lender as a lending fee.

Lease Financing Financing the acquisition of a vehicle by leasing it rather than buying it. The vehicle owner (lessor) agrees to the use of the vehicle by a lessee for a specific term. The lessee keeps the vehicle and pays rent over the term. The lessee generally has the right to terminate the agreement early by buying the vehicle from the lessor. At the end of the term the lessee must either buy the vehicle or extend the lease period.

Owner Financing Seller contributes all or a part of the financing to the buyer.

Residual Value Value of an asset at the end of a lease term.

Per Diem Interest Indicates that the buyer will have to pay interest from the date of closing to the end of the month, depending on the day of the month the deal is finalised. The first home loan payment will usually be due on the first of the following month.

Principal amount of debt, excluding interest, left on a loan.

Refinancing Procedure of paying off one loan with the proceeds from a new loan secured by the same investment.

Endowment plan A policy that pays out an amount at the end of a specified term.

Collateral (Security) An asset (or assets) offered as security for a loan. Sometimes an education policy can be used as security or collateral to guarantee a loan.

Commission A percentage of the policy paid to an agent by the company that offers the education policy.

Investment portfolio A collection of investments such as cash as well as other market instruments (shares, options, warrants etc.). Portfolios can be adjusted to match an investor's willingness to be exposed to risk.

Lump sum A single payment or amount.

Maturity Value The amount that will be paid out to a policyholder after the predetermined investment period has expired.

Waiver Benefit A benefit that ensures that, if the breadwinner becomes permanently disabled in an accident or die before the end of the investment term, the policy will continue to pay the contributions.

CREDIT CARDS

Budget Plan Additional funding facility that allows credit card holders to pay off a larger purchase according to a predetermined period. Interest is charged at a higher rate on a budget plan.

Cardholder Individual to whom a credit card is issued.

Card fees An annual charge on credit card accounts.

Cash advance Cash withdrawals from credit card accounts.

Credit balance Surplus funds deposited in a credit card account.

Credit bureaus Companies that document the credit history of consumers. Banks usually contact credit bureaus to determine if a credit card applicant has a record of defaulting on credit payments.

Credit report Account of a consumer's credit history. This could include all applications made for credit as well as the amount of credit available.

Electronic Funds Transfer Unit (EFT) Machines that merchants and other establishments use to process credit card transactions.

Finance charge Interest and bank charges a credit card holder pays on borrowed money.

Fixed Rate An interest rate that does not vary throughout a loan term.

Free Days (Grace period) The length of time that no interest will be charged on an unpaid balance.

Garage Credit Card A card with credit facilities that caters for petrol and other vehicle-related purchases and transactions.

Interest Charge that credit holders pay on outstanding balances.

Minimum Due/Repayment The minimum amount that a credit card holder is obliged to pay on or before the date indicated on the statement.

Payment due date Date on which the the minimum payment on a credit card is due.

Revolving Credit A line of credit that allows advances up to a predetermined amount. The facility is renewable. Funds that have been repaid can be borrowed again.

Unsecured line of credit A credit facility that is not backed up by any security.

Variable Rate Interest rate that changes periodically in relation to the prime rate. Also known as an adjustable rate.