Reconciliation is the process of analyzing two sets of financial records to ensure that the figures are in agreement. An example of reconciliation is the comparison of a monthly bank statement with an up-to-date check book. This confirms whether funds leaving an account are correct and match the amount that has been spent, providing accuracy and consistency in financial accounts. Differences between the two records may be due to the timing of deposits and payments. However, unexplained discrepancies can be an indication of theft or fraudulent activity.
Refinancing is the process of refunding or restructuring a previous credit agreement with new debt, equity, or both. As a result, this can reduce or extend the maturity of the loan, revise the terms, or obtain a better interest rate for the debtor. This second loan agreement pays off the original one and can allow debtors to potentially lower their overall cost of financing if the interest rate environment has substantially changed.
Renewal refers to the extension of an unpaid loan into a new loan. The borrower will have their remaining unpaid loan balance carried over into the new agreement. Lenders will then outline the terms for renewing or extending a loan within a clause in the original financial agreement, known as a renewal option. This agreement provides specifications for the renewal or extension of the original loan terms for an additional period.
- Residual Interest
Residual Interest is interest that can accrue on an interest-bearing account between statement disclosures. If a borrower is carrying an account balance from month to month, has a balance transfer or cash advance balance, then residual interest will still accrue after the statement date. Even if a borrower pays off their account balance, there could still be residual interest due from previous balances. For example, if the statement cycle date is June 10th and the creditor receives payment on June 20th, then there are 10 days of interest accrued. The next statement will include any interest amount that is still due.
Some financial institutions offer rewards to credit card customers who pay their balance in full each month. This incentivizes customers to use their credit cards for spending and make repayments in a timely manner. Some examples of the credit card rewards available include frequent flyer miles, cashback, and points which the customer can convert into vouchers for shops, restaurants or hotels.
- Right of Offset
The right of offset, also known as the right of setoff, is a lender's legal right to seize the funds that a guarantor or debtor may have on deposit to cover a defaulted loan. A setoff can also refer to a settlement of mutual debt between a debtor and creditor through offsetting transaction claims. Through this agreement, creditors can collect a greater amount than they would be able to under bankruptcy proceedings.
- Right of Rescission
The right of rescission is a borrower's legal right to cancel a contract that uses their property as collateral within three business days of the date of the loan application. This right applies to the cancellation of a home equity loan or line of credit from a new lender, or a refinance transaction with a lender other than the current mortgagee. It does not apply to a first mortgage loan. Borrowers can exercise this right with no fees imposed and on a no-questions-asked basis. The lender must refund any fees paid by the borrower within 20 days and give up its claim to the property. The Truth in Lending Act (TILA) guarantees this right under U.S. federal law.