Financial glossary

Plain definitions of financial terms — with why they matter to you.

APR: Annual Percentage Rate — the total yearly cost of a loan including fees.; Lets you compare loans with different fee structures.
Basis point: One hundredth of a percentage point (0.01%). 100 basis points = 1%.; Banks and markets often quote small rate changes in basis points.
Benchmark rate: A reference rate used to compare your loan against. In BorrowProof, it’s the ECB MIR country average.; Tells you what the “market rate” is for your type of loan.
Collateral: An asset (like property) pledged to secure a loan. The bank can claim it if you don’t repay.; Offering collateral usually gets you a lower rate because it reduces the bank’s risk.
Coefficient of variation (CV): A measure of how much rates vary across banks, expressed as a ratio of the standard deviation to the mean.; BorrowProof uses the ECB’s CV to calibrate how “far from normal” your rate is.
ECB: European Central Bank — the central bank for the euro area, based in Frankfurt.; Sets key interest rates and publishes the lending rate data that BorrowProof uses.
EURIBOR: Euro Interbank Offered Rate — the rate at which European banks lend to each other.; Floating-rate loans are often tied to EURIBOR. When it moves, your rate moves.
Fixed rate: An interest rate that stays the same for the entire loan term.; Gives you predictable payments. Good when rates are low and expected to rise.
Floating rate: An interest rate that can change periodically, usually linked to EURIBOR.; Often starts lower than fixed but can increase. Good when rates are high and expected to fall.
Maturity: The length of time until a loan must be fully repaid.; Longer maturities usually mean higher rates but lower monthly payments.
MIR: Monetary Interest Rates — the ECB’s official statistics on bank lending rates.; This is the data source behind every BorrowProof benchmark.
NFC: Non-Financial Corporation — any business that isn’t a bank or financial institution.; ECB loan data is split between household and NFC (business) loans.
Pass-through: How much of an ECB rate change gets reflected in your bank’s lending rate.; If the ECB cuts by 0.50%, your bank might only lower your rate by 0.30% (60% pass-through).
Premium: The extra interest you pay above a reference rate (like EURIBOR or the ECB deposit rate).; Your premium reflects your credit risk, the bank’s costs, and competition.
Principal: The original amount borrowed, before any interest is added.; Your monthly payment goes partly to reducing the principal, partly to interest.
SME: Small and Medium-sized Enterprise — a business with fewer than 250 employees.; SMEs often pay higher rates than large corporations due to higher perceived risk.
Spread: The difference between two rates — often your loan rate minus a benchmark.; A wider spread means you’re paying more above the baseline.
z-score: A statistical measure of how far a value is from the average, measured in standard deviations.; BorrowProof uses this to determine if your rate is “normal” or an outlier.