Glossary(L)

L

Late Charge

The fee charged for delinquent payment on an installment loan, usually expressed as a percentage of the loan balance or payment. Also, a penalty imposed by a card issuer against a cardholder's account for failing to make minimum payments.

Lease

A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent).

Lender

An individual, financial institution, or other entity that lends money with the expectation that the money will be returned with interest.

Lien

Legal claim against a property. Once the property is sold, the lien holder is then paid the amount that is owed.

Life Estate Beneficiary

An owner who identifies a beneficiary as having a life estate interest in a formal revocable trust is entitled to insurance coverage up to $250,000 for that beneficiary. A life estate beneficiary is a beneficiary who has the right to receive income from the trust or to use trust funds during the beneficiary's lifetime, where other beneficiaries receive the remaining trust funds after the life estate beneficiary dies.

Limited Liability Corporation (LLC)

A business entity with characteristics of both corporations and partnerships. If engaged in an independent activity, a limited liability company or limited liability corporation receives separate share insurance coverage in the Corporation, Partnership, and Unincorporated Association account ownership type.

Line of Credit

A pre-approved loan authorization with a specific borrowing limit based on creditworthiness. A line of credit allows borrowers to obtain a number of loans without re-applying each time as long as the total of borrowed funds does not exceed the credit limit.

Loan Contract

The written agreement between a borrower and a lender in which the terms and conditions of the loan are established.

Loan Fee

A fee charged by a lender to make a loan (in addition to the interest charged to the borrower).

Loan Modification Provision

A contractual agreement in a loan that allows the borrower or lender to permanently change one or more of the terms of the original contract

Loan Proceeds

The net amount of funds a financial institution disburses under the terms of a loan, and which the borrower then owes.

Loan-to-Value Ratio (LTV)

The ratio of the loan principal (amount borrowed) to the appraised value (selling price). For example, on a $100,000 home, with a mortgage loan principal of $80,000, the loan-to-value ratio is 80 percent. The LTV will affect the types of programs available to the borrower; generally, the lower the LTV, the more favorable the program terms offered by lenders.

Local Check

A check payable by, at, or through a financial institution in the same check processing region as the location of the branch of the depository institution. The depository institution is the institution into which the check was deposited. As of February 27, 2010, the Federal Reserve consolidated its checking processing centers into one processing center. Therefore, all checks are now considered local.

Lock-In

A written agreement guaranteeing a homebuyer a specific interest rate on a home loan provided that the loan is closed within a certain period, such as 60 or 90 days. Often the agreement also specifies the number of points to be paid at closing.