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Glossary

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ID Theft

ID theft is the criminal activity of obtaining an individual's personal or financial information with the intent of assuming that person's identity to make unauthorized transactions, purchases, and credit applications. Criminals can commit identity theft in many different ways. Their methods can include taking physical documentation such as credit card statements from bins, to hacking corporate databases to steal the sensitive details of customers. Once an identity thief has obtained the identifying information, they may attempt to access the victim's records and financial resources, receive goods under their name, or obtain identification documents in the name of the victim. This can have a significant negative impact on the victim's credit rating.

Interest

In a financial context, interest refers to the charge for the privilege of borrowing money, typically expressed as a percentage of the amount of the funds loaned. Two main types of interest apply to loans. The first is simple interest, which is a set rate on the original principle that the lender extends to the borrower. The borrower must pay this to be able to access and use the funds. Compound interest is more common and applies to the principle and the compounding interest paid on the loan. Interest can also refer to the amount of ownership a stockholder has in a company.

Interest Rate

An interest rate is the amount that a borrower pays to a lender in exchange for the use of assets over a set period. These assets can include money, consumer goods or large items, such as property or a vehicle. A borrower may pay interest on loans or other debt instruments, including bonds or notes. The interest rate is expressed as a certain percentage of the principal and noted on an annual basis. Interest rates can be due as installment payments over regular intervals or as a lump sum.

Interest Rate Index

An interest rate index is an index based on interest rates of financial instruments, whether it's a complex series of rates or a single item, like the U.S. Treasury securities. Lenders use an interest rate index as a benchmark when calculating the interest rate charged on financial products, such as variable-rate loans and adjustable-rate mortgages.

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