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GLOSSARY
Passive activity
Passive activity is an endeavor which doesn't require or receive an individual's material participation. Owning a property rental, for example, is a passive activity. The characterization of something as a passive activity has important tax consequences; losses resulting from passive activity can't be used to offset gains resulting from active activities.
Passive loss
Passive loss is negative income resulting from a passive activity. A passive activity is an endeavor which doesn't require or receive an individual's material participation, such as owning a property rental. From a tax perspective, passive losses resulting from passive activity can't be used to offset gains resulting from active activities.
Past-due balance method
Past-due balance method is a means of determining financing charges, where interest is calculated on amounts that aren't paid as of the due date.
Pawnbroker
A pawnbroker is a businessperson who makes small loans that are collateralized by personal property. If the loan isn't repaid, the property is sold in a retail store called a pawn shop. Jewelry, watches, and musical instruments are examples of items that would be accepted by a pawnbroker.
Pay yourself first
"Pay yourself first" is a phrase referencing the personal finance strategy of saving first before paying for anything else. To implement the "pay yourself first" strategy, individuals route a designated amount of each paycheck into a savings plan as soon as the check is received. Developing this as a habit keeps the saver on track to meet future savings goals.
Payable on death - POD
Payable on death, or POD, is a banking arrangement that authorizes the bank or credit union to disperse the client's assets/deposits to a beneficiary immediately if the client passes away.
Paydown
Paydown, in reference to debt, is short for paying down. It's a payment made that reduces a debt balance.
Paydown factor
Paydown factor, in mortgage-backed securities (MBS), is the ratio of one month's worth of principal reduction divided by the original principal amount. Paydown factors are reported monthly by MBS issuers.
Payment cap
The top limit on the size of the monthly payment for an adjustable rate mortgage loan.
Payment saver loan
See lease-like loan.
Payment schedule
This is the guidelines set forth for determining when your payment is due and how much each monthly payment will be throughout the life of your loan.
Payment shock
Payment shock refers to the effect that a sudden increase in a loan's minimum payment can have on a borrower. Many mortgage loan products are structured to have potentially large changes in the minimum payment amount. Examples include ARMs with low teaser rates, and interest-only loans that later convert to fully amortizing loans. From a lender's perspective, payment shock is a risk, because the sudden increase could result in borrower default.
Payout phase
Payout phase is the duration of time when an annuity contract makes regular, periodic income payments to the annuitant. Prior to the payout phase, the annuity is said to be in the contribution phase. Annuity payments are taxable income.
Payroll card
A payroll card is a plastic pay card, similar to a debit card, that's funded by wage income. Instead of passing out paychecks, the employer funds each employee's card electronically. Employees can then access their funds at ATM machines.
Payroll tax
Payroll tax is the amount of funds withheld by an employer from an employee's paycheck, to cover federal, state, and local income taxes. Amounts withheld for specific types of taxes are usually itemized on the payroll stub. After the close of the tax year, the employee must fill out a tax return to determine if the payroll taxes withheld were enough to cover taxes owed.