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.
Why it matters: Lets you compare loans with different fee structures.
Basis point
One hundredth of a percentage point (0.01%). 100 basis points = 1%.
Why it matters: 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.
Why it matters: 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.
Why it matters: 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.
Why it matters: 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.
Why it matters: 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.
Why it matters: 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.
Why it matters: 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.
Why it matters: 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.
Why it matters: Longer maturities usually mean higher rates but lower monthly payments.
MIR
Monetary Interest Rates — the ECB's official statistics on bank lending rates.
Why it matters: This is the data source behind every BorrowProof benchmark.
NFC
Non-Financial Corporation — any business that isn't a bank or financial institution.
Why it matters: 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.
Why it matters: 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).
Why it matters: Your premium reflects your credit risk, the bank's costs, and competition.
Principal
The original amount borrowed, before any interest is added.
Why it matters: 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.
Why it matters: 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.
Why it matters: 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.
Why it matters: BorrowProof uses this to determine if your rate is 'normal' or an outlier.