What are the basic loan terms?
These words appear in almost every loan document. Learn them first, and ask your loan officer to explain any that do not make sense in context.
The definitions below are general. Your actual note, mortgage or security agreement controls what applies to you. Every lender may use slightly different words for the same idea, so always compare the terms against your own paperwork.
- Principal: the amount borrowed and not yet repaid
- Interest: the cost of borrowing, charged as a percentage
- Term: how long you have to repay
- Note: the written promise to repay
- Maturity: the date the loan is due in full
- Amortization: spreading payments over time so that the balance falls to zero
What are the FSA loan types?
FSA describes several types of loans, and the names help you ask the right question. Check the official pages for what each covers today.
The categories below are general descriptions, not statements of limits or eligibility. FSA also uses program names that change, so check the official page for what each is called today.
- Direct loan: made with government funds by FSA
- Guaranteed loan: made by a lender with FSA covering part of the loss
- Farm ownership loan: for buying or improving farm real estate
- Operating loan: for yearly costs like seed, feed and equipment
- Microloan: smaller loans with simplified paperwork
- Emergency loan: credit after certain declared disasters
What do collateral and lien mean?
Collateral is property that backs a loan. If you cannot repay, the lender may be able to take the collateral. A lien is the lender's legal claim on that property until the loan is paid.
A mortgage typically secures real estate. A security agreement typically secures personal property like equipment, crops and livestock. Lenders may file public notices of their claims, and they release them when you pay off the loan. Pay attention to the order of liens when more than one lender is involved, since the first lien has priority in a sale.
- Collateral: property pledged to secure the loan
- Lien: the lender's claim on the property
- Mortgage: a claim on real estate
- Security agreement: a claim on personal property
- Lien release: proof the claim has ended
What terms describe the borrower and the farm?
Lenders use special words for who you are and how you farm. Some also have special meanings in federal programs.
Ask staff for the exact definition they use, since eligibility often depends on the program's own wording. If you farm through a business, ask who signs personally and who signs only for the entity.
- Applicant: the person or entity asking for credit
- Entity: a business such as a partnership, corporation or LLC
- Beginning farmer: a status defined by program rules
- Cosigner or guarantor: someone who agrees to repay if you do not
- Balance sheet: a list of assets and debts
- Cash flow: money in and out over time
What are servicing and distress terms?
After a loan is made, the lender or FSA manages it. Servicing means keeping track of payments and handling changes.
If payments fall behind, other terms appear. Learn them before you need them, and respond calmly to any notice. Distress terms can sound frightening, but most borrowers who talk to their lender early find the process manageable.
- Servicing: managing a loan after it closes
- Delinquent: behind on a required payment
- Default: failing to meet the loan terms
- Deferral: a delay in payments under defined conditions
- Restructuring or rescheduling: changing the payment plan
- Foreclosure: the legal process to take real estate after default
What documents and process terms should I know?
Some terms describe the paperwork or the process. Knowing them helps you read your closing papers with care.
If you do not understand a document, ask before signing, and ask whether an attorney should review it. A good habit is to keep every closing document in one binder, with a table of contents.
- Appraisal: an expert's estimate of value
- Title: legal ownership of property
- Closing: the meeting where documents are signed
- Payoff statement: exact amount owed on a certain date
- Farm operating plan: your written plan and budget
- Appeal: a request to review an agency decision
How should I use this glossary?
Keep it next to your loan documents. When you meet with a loan officer, write down any word you do not recognize and ask. There is no shame in asking. Lenders would rather explain a term than have you sign something you do not understand.
Remember that official definitions can differ from everyday meanings, and they can change. For anything that affects your rights or payments, check the document, the FSA website and an attorney or accountant.
Key takeaways
- Learn principal, interest, term, collateral and lien before you sign.
- Know the difference between direct and guaranteed loans.
- Servicing terms like deferral and restructuring matter if payments become hard.
- Ask for the exact definition a program uses.
- Keep the glossary with your loan papers.
Sources and official links
Last reviewed: November 12, 2026. Written by the Farm Money & Grants Editorial Team. Educational only, not tax, legal or financial advice. See our editorial policy.