APPLY
NOW / LOGIN
GLOSSARY
Preapproval letter (mortgage)
A preapproval letter (mortgage) is a document produced by a mortgage lender or broker that provides an estimate of how much an individual would be able to borrow in the current interest rate environment. A preapproval letter can be submitted with an offer to make the seller feel more comfortable about the buyer's prospect of obtaining financing.
Predatory lending
Predatory lending describes the practice of dishonest or unethical conduct by loan brokers and lenders for the purposes of persuading borrowers to take inappropriate, over-priced loans. The federal government and some state governments have laws prohibiting predatory lending.
Preferred debt
Preferred debt is an amount owed that has repayment priority over another debt. In reference to mortgages, for example, a first mortgage has a higher lien position than a second mortgage. Of the two loans, therefore, the first mortgage is the preferred debt.
Preferred provider organization
A preferred provider organization, or PPO, is a type of healthcare coverage that allows the insured to select from lower-cost, network providers and higher-cost, out-of-network providers. Coverage applied to in-network healthcare is generally more expansive and costs less than coverage applied to out-of-network care.
Preforeclosure sale
Preforeclosure sale is a property sale that takes place in lieu of foreclosure, where the money raised by the sale is used to pay off the debt. In many cases, the funds raised are less than the amount owed and the lender must write-off the difference. Preforeclosure sales can only proceed with approval from both the borrower and the lender.
Premature distribution
A premature distribution is a taxable, penalized withdrawal made from a tax-advantaged retirement plan. An example of a premature distribution is the removal of funds from an IRA before the accountholder reaches the age of 59 1/2. This type of withdrawal is subject to a 10 percent penalty.
Premium
A premium is the cost of an insurance policy. Premium can also mean the amount paid for something over and above its stated value. A concert-goer, for example, would probably pay a premium for front row seats.
Prenuptial agreement
A prenuptial agreement a legal arrangement between a man and woman who intend to marry. The agreement specifies how their property is to be distributed in the event of divorce. The prenuptial agreement can also outline each person's rights and responsibilities while the marriage is in force.
Prepaid expenses or prepaid items or prepaids
Prepaid expenses, prepaid items or prepaids are business balance sheet assets that are created when goods and services are paid for in advance. Consider, for example, a business that pays its insurance premiums in December for policies that are in force for the following calendar year. Rather than account for this transaction as an expense in December, the premium amount is held in a balance sheet account (called prepaid expenses). and expensed periodically throughout the following year. Doing so matches the expense with the timing of the benefit received.
Prepaid interest
As a way to save on taxes, a borrower can pay interest before it is due.
Prepaid tuition plans
An option that lets potential and future parents pay for a semester of college today which will lock in the current interest rate for the future educations regardless of the year and tuition increases.
Preparation charges
An additional way for a car dealer to make money by convincing the buyer that they need to pay for prep charges which have already been paid by the manufacturer in order to get the car ready for sale.
Prepayment
A full or partial payment of the principal amount of the loan before due date.
Prepayment penalty
A penalty or fee charged for payment of the loan amount before the due date.
Prepayment plan
A prepayment plan is a mortgage payment plan that's managed by a third party. The mortgage borrower makes biweekly payments to the third party, which then funds the borrower's required monthly payment. After one year, the borrower will have made 26 half-payments, which amounts to 13 total payments to the third party. Over the same time period, the mortgage lender will only require 12 payments due. The third party sends the lender the additional amount as an extra principal payment. Over time, this dramatically reduces the mortgage interest costs, and shortens the length of the loan.