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GLOSSARY
Default premium
Default premium is the extra charge that a bad credit borrower must pay for borrowed funds. Financial institutions charge higher rates when lending money to individuals and corporate debtors with poor credit histories, because these borrowers present a higher risk of default.
Default probability
Default probability is a value representing the chances that a borrower will violate the terms of a loan contract. If a borrower fails to make payments as specified in the loan documentation, that borrower is said to be in default. Lenders use default probability as one factor in approving and setting terms for loan requests.
Default risk
Default risk describes the likelihood that a borrower will fail to make debt repayments as promised, or fail to meet other covenants of a loan agreement. Lenders assess a borrower's default risk when deciding whether to make a loan offer and what the terms of the offer should be.
Deferment
A postponement of loan repayment, often allowed by the lender during the duration of a student's education and for certain post-college programs such as the Peace Corps. Students may also request a deferment post graduation in times of financial hardship; this can change the terms of loan, however.
Deferred account
A deferred account is a savings vehicle, such as an IRA, that postpones income tax liabilities until some future date. In regular IRAs, for example, earnings are not taxed until funds are withdrawn.
Deferred annuity
A deferred annuity is a savings program that postpones income payments and income tax liability until some future date. The annuity is structured with a savings phase, during which the accountholder makes contributions, and an income phase, during which the saved funds are paid out in installments.
Deferred compensation
Deferred compensation is the portion of an employee's income that's set aside for use at some future date. Most commonly, the deferred compensation is funneled into a retirement account or pension plan. Income tax on these funds is usually postponed until the money is accessed by the employee.
Deferred Interest
A deferred interest loan is when a loan payment stays the same while the interest rate increases. A deferred interest loan will let you choose to pay only the minimum payment--a payment less than the entire interest owed for that month. The unpaid interest is then added to your loan amount to be paid at a later date.
Deferred payment
Deferred payment is a form of short-term credit, where an amount due is to be paid back at some future date.
Deferred Profit Sharing Plan - DPSP
A Deferred Profit Sharing Plan, or DPSP, is a profit-sharing and pension arrangement available in Canada. Qualified DPSPs are registered with the Canada Revenue Agency and sponsored by employers. The employer deposits a portion of profits into the plan, and employees are not liable for income taxes until funds are withdrawn.
Defined-benefit plan
A defined-benefit plan is a type of retirement or pension arrangement. Under a defined-benefit plan, retirement payouts are calculated based on a specific formula; common factors include the employee's length of employment, and salary history. The employer manages the funding portfolio and is responsible for keeping it adequately capitalized to support future benefit obligations.
Defined-contribution plan
Defined-contribution plan is a retirement savings vehicle, where an employee voluntarily deposits a portion of her salary into the account, and is responsible for managing the investment portfolio. These include 401(k) and 403(b) plans.
Deflation
Deflation is an economic condition where prices drop throughout a region or economy. Deflation, which is the opposite of inflation, can result from a tightening of the money supply.
Delinquency
This is the failure to pay monthly motgage on due dates. Even if late fees are not charged, the late payment is called loan deliquent and beyond the stipulated 30 days, lenders have the right to report the late payment to credit bureaus.
Delinquent mortgage
When a borrower fails to make their mortgage payments on time according to the terms of the loan.