Throughout your student career, you'll have money moving in and money going out. Here are some topics that may help you understand what it all means and why it matters.
Academic Year – The student assistance academic year in Canada runs August 1 to July 31. Your academic year is the year in which you start your classes. For example, you might apply in February 2017 for classes starting in July 2017. You are applying for the 2016-2017 academic year, even though your classes might not end until 2018.
Assets– Assets are things you own. These can be cash or something that can be converted into cash such as property, vehicles, or investments.
Audit- a review performed by an auditor or other official on a business' or individual’s financial records or account. An audit of a student assistance account checks that everything in the account or records was done correctly, truthfully, and it verifies that a borrower received the correct amount of funding or repaid on their account correctly.
Bankrupt- an individual is bankrupt when they cannot pay their debts and aren't able to reach an agreement with their creditors.
Bankruptcy- a process where an individual is legally declared bankrupt and their assets and financial affairs are administered by an appointed trustee.
Bookkeeping- the process of recording the financial transactions of an individual or organization.
Budget- a listing of planned income and spending for a certain given time period.
Co-signer – a person who promises to pay a loan in the event the borrower cannot meet the repayments. The guarantor is legally responsible for the debt. This is also known as a “guarantor”. You might need a co-signer if you borrow money for school through a student line of credit.
Credit- a lending term used when a customer purchases a good or service with an agreement to pay at a later date (e.g. an account with a supplier, a store credit card or a bank credit card).
Creditor- a person or business that allows you to purchase a good or service with an agreement to pay at a later date. A creditor is also anyone who you owe money to, such as a lender or supplier.
Credit limit- a dollar amount that cannot be exceeded on a credit card or the maximum lending amount offered for a loan.
Credit rating- a ranking applied to a person or business based on their credit history that represents their ability to repay a debt
Credit history- a report detailing an individual's or business’ past credit arrangements. A credit history is often sought by a lender when assessing a loan application.
Current asset- an asset in cash or that can be converted into cash within the next 12 months.
Current liability- a liability or money owed that is due for payment in the next 12 months.
Debt- any amount that is owed including bills, loan repayments and income tax.
Debt consolidation- the process of combining several loans or other debts into one for the purposes of obtaining a lower interest rate or reducing fees. In student assistance, consolidation is often used to describe the point six months after the student leaves school, when their student loans are totalled up and the they begin to repay their loans.
Debtor- a person or business that owes you money.
Default- a failure to pay a loan or other debt obligation.
Fiscal year- a twelve month period of financial transactions. In government, the fiscal year runs April 1 to March 31, and is matched by an annual government budget.
Financial statement- a summary of a person or business’ financial position for a given period.
Fixed interest rate- When the interest rate of a loan remains the same for the entire term that you are repaying the loan or some other mutually agreed timeframe, you have a fixed interest rate.
Forecast- a prediction of future financial transactions. Forecasts are often used to help plan a more accurate budget.
Gross income- the total money earned by a person before expenses are deducted.
Interest– when you borrow money, the lender charges you money as long as you are using their money until it’s all repaid. The money they charge you is interest. Interest is also money you earn when you deposit your own money in an interest-bearing account (such as a savings account at a bank).
Interest rate- a percentage used to calculate the cost of borrowing money or the amount you will earn. Rates vary from product to product. Generally, the higher the risk of the loan, the higher the interest rate. Interest rates can be fixed or they can vary. Variable interest rates usually go up and down according to the cost of borrowing money in worldwide financial markets.
Investment- an asset purchased for the purpose of earning money such as shares in a company or property (such as a home that you rent out.)
Invoice- a document provided to a customer to request payment for a good/service received.
Liability- a financial obligation or amount owed. Your student loan debt is a liability until it’s been repaid.
Line of credit- an agreement allowing a borrower to withdraw money from an account up to an approved limit. Many students use a student line of credit from a bank or credit union to help pay for school. Unlike student loans, a student line of credit usually starts to charge interest on the money as soon as you start to use it (withdraw it).
Loan- a finance agreement where one person or organization borrows money from a lender and pays it back in instalments (plus interest) within a specified period of time.
Maturity date- when a loan's term ends and all outstanding principal and interest payments are due. Student loans must be repaid within 9.5 years (or less, depending on the amount of the loan) of the start of repayment.
Overdrawn account- a credit account that has exceeded its credit limit or a bank account that has had more than the remaining balance withdrawn.
Overdraft – If your bank account allows you to withdraw more than you actually have in the bank, you have an overdraft on your account. An overdraft is a credit product.
Principal- the original amount borrowed on a loan or the remainder of the original borrowed amount that is still owing. The principal excludes the interest portion of the total amount.
Receipt-a document provided to a customer to confirm payment and to confirm a good/service has been received.
Refinance- when a new loan is taken out to pay off an existing one. Refinancing is often done to extend the original loan over a longer period of time, to reduce fees or interest rates, to switch banks, or to move from a fixed to variable loan.
Repossess- the process of a bank or other lender taking ownership of property/assets for the purpose of paying off a loan in default. If you borrow money to pay for a car, but fail to make the car payments to the bank, the bank could repossess your car.
Return on investment (ROI)- a calculation that works out how efficient a business is at generating profit from the original equity provided by the owners/shareholders.
Revenue-the amount earned before expenses, tax and other deductions are taken out.
Variable interest rate- when the interest rate of a loan changes with market conditions for the duration of the loan.