Glossary
The words behind the numbers: what each term means, in plain language, and where to see it in the tools. Pick a term in the index to jump straight to it.
Amortization
The part of each installment that repays the amount borrowed, as opposed to the interest. To amortize also means to pay more than the installment to reduce the balance ahead of time: since interest is charged on the balance, the sooner it falls, the less interest is paid.
CDI (interbank deposit rate)
The average rate of the overnight loans that banks make to one another. It follows the Selic rate closely and is the main benchmark of fixed income in Brazil: an investment can pay the whole CDI or a percentage of it, and a loan can use it as its reference too.
CET (total effective cost)
The total effective cost (CET) gathers everything a loan costs into one annual rate: the interest, plus the fees, insurance and taxes that come with the contract. That is why it is usually higher than the advertised interest rate. Comparing two contracts by their CET, and not only by the rate, shows which one really costs more.
Credit portability
Moving a debt from one financial institution to another, usually to change the terms of the contract, such as the rate or the length. The new institution pays off the old contract and becomes the creditor. Before comparing, it takes the outstanding balance, the current rate and the cost of the move.
Euribor (euro interbank rate)
The Euro Interbank Offered Rate: a family of reference rates for loans between banks in the euro area, administered by the European Money Markets Institute (EMMI). Many variable-interest mortgages in Spain and in other European countries are tied to it, so their installments move when it moves.
Grace period
A period at the start of the contract in which you do not repay the amount borrowed. During the grace period the interest can be paid month by month or added to the balance, which is called capitalizing it; in the second case the debt grows and the later installments are larger. The contract says which of the two applies.
IOF (tax on credit operations)
A federal tax in Brazil on credit, foreign exchange, insurance and securities operations, charged when the money is released. In the simulations, Finasst estimates it with the rates in force that day and can add it to the amount financed or deduct it from what reaches your account. The figure in your contract is the one that counts.
IPCA (inflation index)
The Broad National Consumer Price Index, calculated by IBGE and used as Brazil's official measure of inflation. Some investments and contracts use it to adjust amounts: a bond that pays IPCA plus a rate aims to keep purchasing power and still earn the agreed rate on top.
Late-payment penalty
An amount charged once when an installment is paid after its due date, usually a percentage of the overdue amount. Unlike the moratory interest, the penalty does not grow with the days. The percentages and limits depend on the type of contract and the country, and the contract says which one applies.
Moratory interest
Interest charged for each day an installment is paid late, counted from the due date. It adds to the penalty, which is charged only once. In Finasst it is calculated as simple interest on the amount of the installment, day by day: the more days, the more interest.
Outstanding balance
How much of the amount borrowed you still owe, not counting the interest of future installments. Each installment paid reduces it by the part that amortizes, and the month's interest is charged on it. It is the starting point for working out what it would cost to settle the debt on the next due date.
PRICE system
An amortization system in which every installment has the same value from start to finish. At first most of each installment is interest and the balance falls slowly; over time the share that repays principal grows. The first installment is usually lower than under SAC, and the total interest is higher.
Real discount (haircut)
In a debt renegotiation, the discount an offer really gives on the amount owed once the penalty and the late interest are added. An offer can look smaller than the original debt and still carry no discount at all, because the debt grew with the delay. The haircut measures how much of the updated debt is actually forgiven.
Revolving credit
The credit that automatically finances what is left of a credit card bill when it is not paid in full. It has no fixed installments or set term: the balance is carried from one month to the next with new interest charged. An overdraft account works in a similar way.
SAC system
An amortization system in which each installment repays the same share of the amount borrowed and interest is charged on the balance that remains. The first installment is therefore the largest and the following ones fall. Total interest is usually lower than under PRICE, but the start weighs more on the monthly budget.
SCR and Registrato
The SCR, the Credit Information System, is the central bank's database of each person's credit operations in the financial system. Registrato is the central bank's service where people consult their own data and can obtain their SCR report. The report is personal and shows how much is owed and to which institutions.
Selic rate
The basic interest rate of the Brazilian economy, set periodically by the central bank's Monetary Policy Committee. It is the base for the other rates: when it rises, the interest on credit tends to rise, and so does the return on fixed income.
SOFR (US reference rate)
The Secured Overnight Financing Rate: the benchmark rate for dollar loans in the United States, published by the Federal Reserve Bank of New York. It is based on overnight loans backed by US Treasury securities, and many contracts and investments in dollars refer to it.
TR (Referential Rate)
An index calculated and published by Brazil's central bank, used to adjust some contracts, such as part of the mortgages, and the savings account. When a contract says interest rate plus TR, the balance is also updated by TR, so the installment can change over time. Finasst's simulator works with a fixed rate, so an indexed contract is outside its exact calculation.
Write-off as a loss
The name for a credit that the institution has already booked as a loss because it considers it unlikely to be paid. Booking it as a loss is an accounting decision of the institution: by itself it does not mean the debt stopped existing. It is one of the kinds of record that can appear in an SCR report.