Personal finance glossary (A–Z)
Understanding personal finance often involves unfamiliar terms. This glossary explains common financial concepts in plain language to help you interpret information more easily.
Asset
Something you own that has value, such as property, a vehicle, or investments.
Bonds
A type of investment where you lend money to a government or company in exchange for interest payments over time.
Borrowing costs
Costs associated with borrowing money, which may include interest and fees such as establishment or account fees.
Budget
A plan that outlines income and expenses over a set period.
Collateral
An asset used as security for a loan, which a lender may claim if repayments are not made as agreed.
Compound interest
Interest calculated on the original amount plus any interest already earned or charged.
Credit score
A numerical summary of information in a credit report. Credit scores are one of several factors lenders may consider when assessing applications.
Credit check
A review of a borrower’s credit report. This may be recorded as a hard or soft enquiry, depending on the type of check.
Debt consolidation loan
A type of loan used to combine multiple debts into a single loan with one repayment schedule, subject to the loan terms.
Debt-to-income ratio
A measure that compares total debt repayments to income over a given period.
Diversification
An investment approach that involves spreading funds across different assets or asset classes to manage risk.
Dividend
A payment made by a company to its shareholders, usually from profits.
Equity
The difference between the value of assets owned and the amount owed on those assets.
Expenses
Money spent on goods, services, or financial commitments.
Guarantor
A person who agrees to repay a loan if the borrower does not meet their repayment obligations, in accordance with the loan agreement.
Income
Money earned from sources such as wages, salary, government payments, or other regular receipts.
Inflation
The rate at which prices for goods and services increase over time.
Interest rate
The percentage charged on borrowed money, or earned on savings or investments.
Investment
The purchase of an asset with the expectation that it may increase in value or generate income over time.
Liability
An amount owed, such as a loan or credit card balance.
Loan
A financial agreement where money is borrowed from a lender and repaid over time, usually with interest and fees.
Refinancing
Replacing an existing loan with a new loan, often to change loan terms or repayment structure.
Saving
Money set aside after expenses have been paid.
Savings account
A bank account used to store money, which may earn interest depending on the account terms.
Secured loan
A loan backed by an asset used as collateral. If repayments are not made, the lender may be able to sell the asset.
Shares
Units of ownership in a company.
Superannuation
Australia’s retirement savings system, where contributions are generally made over a person’s working life.
Term
The length of time over which a loan is scheduled to be repaid.
Unsecured loan
A loan that does not require an asset to be used as collateral.
Understanding these terms empowers you to:
Understanding common financial terms can help you better interpret information when reviewing financial products, speaking with professionals, or planning ahead.
Clear financial language can also support more effective conversations with advisers, lenders, and other service providers by helping you understand the information being discussed.
For further general information on financial literacy, you may find resources from Australian Securities and Investments Commission helpful.
Disclaimer: This article is for general information only. It does not take into account your individual circumstances and is not financial advice. Consider seeking independent advice before making financial decisions.
