Financial Services, Credit & Lending Basics

Financial Services

Industry that manages the flow of money between people and institutions through avenues like lending, banking, insurance, and investment, and prices the risk that comes with it

Financial Service Providers

Commercial banks, credit unions, brokerage firms/houses, insurance companies, tax and accounting firms, credit card companies, payment processing companies, real estate companies, fintech companies

Fintech

Companies available online including software, online banks, mobile apps, and more that allow you to access and manage money digitally. Can make digital financial transactions such as sending money, trading stocks, or buying crypto assets

Loan

A financial agreement where an entity provides money to another with the expectation of repayment over time, often including interest as a cost of borrowing. Can be a one-time amount or open-ended line of credit up to a specified limit

Loan Components

Principal (original amount borrowed), Loan Term (time to repay), Interest Rate (rate at which amount owed increases, expressed as APR), Loan Payments (amount due each period), Additional Fees (origination, servicing, late payment)

Principal

The original amount of money being borrowed, before any interest or fees

Loan Term

The amount of time the borrower has to repay the loan

Interest Rate

The rate at which the amount of money owed increases, usually expressed as Annual Percentage Rate (APR)

Simple Interest

Interest calculated only on the principal loan amount. Banks almost never charge borrowers simple interest

Compound Interest

Interest on interest — applied not only to the principal but also to accumulated interest from previous periods. Interest is charged monthly on the principal including accrued interest from prior months

Annual Percentage Rate (APR)

The annualized cost of borrowing expressed as a percentage. Includes interest and fees. Elastic's effective APR starts at 137%

Secured Loan

Debt collateralized by assets that can be seized if the borrower defaults, reducing lender risk. Examples: mortgages (collateral = home), car loans (collateral = vehicle)

Unsecured Loan

Debt not backed by collateral. Generally has higher interest rates because the lender has limited protection against loss in default. Examples: credit cards, medical bills, personal lines of credit

Revolving Credit

A type of credit account that allows the borrower to repeatedly borrow up to a certain limit. Making payments reduces the balance and frees up credit to use again. Examples: credit cards, personal lines of credit, HELOCs

Open-End Credit

Credit that stays open and reusable after repayment. The credit line remains available as long as the account is in good standing. Elastic is explicitly open-end

Closed-End Credit

Once you borrow and repay, it is done. The credit line does not replenish. Most installment loans are closed-end

Installment Loan

A fixed amount borrowed and repaid in fixed payments over a set term. Examples: auto loans, mortgages, personal loans. RISE (Elevate's installment product) is this type

Line of Credit

A revolving credit product where a borrower can draw funds up to a set limit, repay, and draw again. Elastic is a personal line of credit ranging from $500 to $4,500 ($6,000 for existing customers via credit line increase)

Credit Card

The most common type of revolving credit. You can charge purchases up to the credit limit, pay them off, and repeat. Today Card is Elevate's credit card product

Minimum Monthly Payment

The least amount a borrower must pay each month to remain in good standing on a revolving credit account

Late Fee

A charge applied when a borrower misses a payment. Late payments are generally reported to credit bureaus once they are 30 days past due

Credit Score

A numerical representation of a borrower's creditworthiness used by lenders to assess default risk. The dominant US model is FICO, scored 0-850

FICO Score

The primary credit scoring model in the US, scored 0-850. Calculated from payment history, amounts owed (utilization), length of credit history, new credit inquiries, and credit mix

Credit Score Tiers

750+ = Prime/Super-prime. 670-749 = Near-prime. 580-669 = Subprime/Non-prime (Elastic's customer). Below 580 = Deep subprime

Credit Score Inputs

Payment history (most weighted), amounts owed/utilization, length of credit history, new credit inquiries, credit mix

Payment History

A record of on-time payments. The most heavily weighted factor in a credit score. Late payments are only reported to bureaus once 30 days past due

Credit Utilization Ratio

Amount of credit used out of total available. Example: $1,000 balance on a $3,000 limit = 33.33%. Experts recommend keeping below 30% for the best credit score

Hard Pull

A credit inquiry that affects the borrower's credit score and is visible to other lenders. Elastic performs a hard pull on application

Soft Pull

A credit inquiry that does not affect the borrower's credit score. Used for pre-qualification offers and self-checks

Debt-to-Income Ratio (DTI)

Monthly debt obligations divided by gross monthly income. Example: $1,200 in monthly debt on $3,000 income = 40% DTI. High DTI = higher default risk. A common underwriting input

Collateral

An asset pledged by a borrower to secure a loan. If the borrower defaults, the lender can seize the collateral to recover losses

Default

When a borrower fails to repay a loan according to its terms. Triggers collection activity and eventually charge-off if unresolved

Delinquency

When a borrower is behind on payments. Tracked at 30, 60, and 90 days past due. Leading indicator of eventual default

Charge-Off

A balance declared uncollectable and written off as a loss. Sometimes sold to a debt buyer. The endpoint of the delinquency cycle

Non-Prime Borrower

A consumer with a FICO score generally below 660-670. Limited access to traditional credit products. Higher default risk so lenders charge higher fees and rates. Elastic's target customer

Subprime Lending

Extending credit to borrowers with below-average credit scores at higher rates to compensate for increased default risk. Elevate's core business

Risk-Based Pricing

Charging different rates or fees based on assessed borrower risk level. Higher risk = higher fee. Governs the broader non-prime lending industry

Ability to Repay

The principle and in many cases regulatory requirement that a lender must assess whether a borrower can actually afford to repay before extending credit

Origination Fee

A fee charged by the lender at the time a loan is made. Part of the total cost of borrowing

Cash Advance Fee

A fee charged when a borrower draws funds from a line of credit. Elastic charges a 10% cash advance fee deducted at time of draw

Carried Balance Fee

A recurring fee charged when a borrower carries a balance from one billing cycle to the next. Elastic charges $5-$410 per billing cycle if balance exceeds $10. Up to $550 for credit line increase customers

Cooling Off Period

A mandatory waiting period after a borrower pays off their balance before they can borrow again. Elastic requires customers to pay off their balance and wait 20 days before borrowing again

Credit Bureau

Organizations that collect and report consumer credit data. The three major US bureaus are Experian, Equifax, and TransUnion. Lenders pull from one or more to assess a borrower's credit report and score

Experian

One of the three major US credit bureaus. Provides credit reports and scoring data used in underwriting decisions

Equifax

One of the three major US credit bureaus. Provides credit reports and scoring data used in underwriting decisions

TransUnion

One of the three major US credit bureaus. Provides credit reports and scoring data used in underwriting decisions

ACH (Automated Clearing House)

The system used to deposit loan proceeds into customers' bank accounts and collect repayments by withdrawing authorized funds. Elevate uses ACH for both disbursement and collection

KYC (Know Your Customer)

The identity verification process required by law before opening a financial account. Required when someone applies for Elastic

AML (Anti-Money Laundering)

Regulations requiring financial institutions to monitor and report suspicious activity. Part of the broader compliance landscape for consumer lenders

TILA (Truth in Lending Act)

Federal law requiring lenders to clearly disclose APR and all fees before a consumer signs. Governs Elastic's fee disclosures

FCRA (Fair Credit Reporting Act)

Governs how credit bureaus collect and report data and how lenders can use it. Directly relevant to underwriting — pulling credit reports requires FCRA compliance

Reg B / ECOA (Equal Credit Opportunity Act)

Prohibits discrimination in credit decisions based on race, sex, national origin, and other protected classes. Underwriting criteria cannot have disparate impact on protected classes

UDAAP

Unfair, Deceptive, or Abusive Acts or Practices. The CFPB's broad enforcement standard. Triggered when a product's fees or terms could be considered deceptive or abusive to consumers

CFPB (Consumer Financial Protection Bureau)

The federal regulator that oversees consumer lending. Actively monitors non-prime lenders. Compliance with CFPB standards is woven into every Elastic product decision

Military Lending Act (MLA)

Limits how much lenders can charge military members. Elastic's eligibility criteria specify that covered borrowers under the MLA cannot apply

State Usury Laws

State-level caps on interest rates. Some states cap rates in ways that make Elastic's effective APR illegal to offer directly — hence the sponsor bank structure with Republic Bank

True Lender Doctrine

The legal debate over whether the fintech or the bank partner is the true lender in a sponsor bank model. Relevant to Elastic because state usury laws could apply if Elevate were deemed the true lender rather than Republic Bank

Sponsor Bank Model

Elevate partners with Republic Bank & Trust, which is federally chartered and can export its home state's interest rates nationally. Elevate provides the tech, underwriting models, and marketing. Republic Bank originates the loans and holds regulatory liability. Every product change requires bank approval

Republic Bank & Trust

Elevate's external bank partner that originates Elastic credit lines. Makes all key decisions regarding Elastic marketing, underwriting, product features, and pricing. All product changes require Republic Bank approval

Elevate Credit

A Fort Worth-based fintech providing online credit products to non-prime borrowers. Mission: Good Today, Better Tomorrow. Products: RISE (installment), Elastic (revolving line of credit), Today Card (credit card). Over $10 billion originated to 2.7 million+ customers

Elastic

A revolving personal line of credit for non-prime borrowers. Lines available from $500-$4,500 ($6,000 for existing customers). No interest — charges a 10% cash advance fee and carried balance fees up to $410 per cycle. Available in 39 states and DC. Issued through Republic Bank & Trust. Effective APR starts at 137%

RISE

Elevate's installment loan product for non-prime borrowers. A closed-end product as opposed to Elastic's open-end revolving structure

Today Card

Elevate's credit card product. A revolving credit product like Elastic but delivered as a card

Interest Rate Exportation

A federally chartered bank's ability to apply its home state's interest rates to loans made in other states, regardless of those states' usury laws. The legal foundation of the sponsor bank model

Loan-to-Value Ratio (LTV)

The loan amount divided by the value of the asset being financed. Used in secured lending like mortgages. Less directly relevant to Elastic but part of general underwriting literacy

Amortization

Paying off debt over time in regular intervals. Loan origination systems can generate amortization schedules automatically. More relevant to installment loans than revolving credit

Credit Life Cycle

The full arc of a credit account: Acquisition → Onboarding → Servicing → Collections → Charge-Off. The PM role touches product decisions at every stage

Acquisition (Credit Life Cycle)

Marketing to and approving new borrowers. Risk lives here in the form of underwriting policy — who you let in determines your future default rate

Onboarding (Credit Life Cycle)

Customer opens account, receives a credit line, and takes their first draw

Servicing (Credit Life Cycle)

The ongoing relationship where the customer draws, repays, and draws again. Where carried balance fees accumulate and delinquency monitoring happens

Collections (Credit Life Cycle)

Borrower falls behind on payments. Internal collections team contacts them and sets up payment plans

Charge-Off (Credit Life Cycle)

Balance declared uncollectable and written off. Sometimes the debt is sold to a third-party debt buyer