APPLY
NOW / LOGIN
GLOSSARY
Covenant
A covenant, in a general sense, is a formal agreement. In lending, covenants are promises made by the borrower to meet certain reporting requirements, achieve certain financial metrics, or refrain from performing certain actions. Covenants are clearly defined within the loan documentation.
Covenants, conditions and restrictions (CC&Rs)
Covenants, conditions, and restrictions, or CC&Rs, are legally enforceable rules pertaining to the use of property. Homeowners' associations commonly have CC&Rs, which mandate proper exterior landscaping and maintenance of the home, or restrict neighborhood homeowners from parking unsightly vehicles in their driveways. CC&Rs are generally intended to preserve the property values in the neighborhood.
Coverdell accounts
Coverdell accounts are educational savings accounts that offer tax advantages. Contributions to the account are not tax deductible, but the earnings within the account accumulate tax free. Tax-free withdrawals can also be made as long as the funds are used for qualified educational expenses. There's a cap on the annual contributions allowed.
Coverdell Education Savings Account - ESA
Coverdell Education Savings Account, also known as CESA or ESA, is a tax-advantaged savings program for children under the age of 18. Families contribute to the account with post-tax dollars, but the earnings accumulate without incurring tax liability. Withdrawals are tax-free as long as the funds are used for qualified educational expenses. There's a cap on the annual contributions allowed.
CPI
The CPI, or Consumer Price Index, is a statistic that tracks the cost of living in the U.S. CPI is used as an inflationary indicator, with rapid increases indicating inflation, and rapid decreases indicating deflation.
Cramdown
Cramdown is the term describing a bankruptcy court's approval and enforcement of a reorganization plan that's not been endorsed by all of the creditors.
Creative financing
An innovative and atypical way of structuring a home loan that allows the buyer to buy afford house.
Credit
When a borrower receives something of value in exchange for a promise to repay the lender at a later time in the form of an agreement or contract.
Credit agency
A credit agency collects and maintains debt payment histories of individual and corporate borrowers. Lenders use this information to evaluate a prospective borrower's creditworthiness.
Credit analysis
Credit analysis is the evaluation of a prospective borrower's debt application. The process of credit analysis is applied to individual and corporate borrowers; the purpose is to predict how likely the borrower is to repay the debt as promised. In the case of debt securities, investors also follow the tenets of credit analysis to determine the risk involved in purchasing the security.
Credit bureau
A credit bureau collects and maintains debt payment histories of individual and corporate borrowers. Lenders use this information to evaluate a prospective borrower's creditworthiness.
Credit card
A credit card is a plastic payment card that's linked to a revolving credit account. The borrower/cardholder uses the card for payment, and receives an itemized statement of transactions at the end of each reporting period. If the balance is not paid in full by the end of the grace period, interest charges are added automatically to the account.
Credit check
A credit check is the review of a loan applicant's debt payment history. Lenders perform this review to predict how the applicant will handle the proposed debt obligations.
Credit cliff
Credit cliff is a slang reference to the dangers of excessive debt leverage. In business, for example, a highly leveraged company may fall out of compliance with financial covenants and suffer a resulting interest rate increase. That increase could compound the company's financial problems, causing further covenant violations and further rate increases.
Credit default swap
A credit default swap is an arrangement that transfers a lender's risk of nonpayment to another party. The arrangement is made between a lender and a counterparty, based on a debt created between that lender and a third party. The lender makes payments to the counterparty, and in return, the counterparty agrees to guarantee the third party's debt. If the third party defaults, the counterparty pays off the lender and assumes the debt.