Many financial terms are taken for granted in everyday conversation, contracts and financial news, but they're rarely explained clearly. This glossary brings together, in one place, the most common concepts we've covered in detail throughout this blog.
Loan and mortgage concepts
- Nominal rate (TIN): the pure interest percentage applied to the principal, excluding fees.
- APR (TAE): the annual percentage rate, the real total cost of a loan including fees, the figure you should always use to compare.
- Amortization: the portion of each installment that reduces the outstanding principal of a loan.
- Grace period: a period during which you pay a reduced installment (or nothing) without normally paying down principal.
- CIRBE: the Bank of Spain's register of your total debt across the entire financial system.
Payslip and income tax concepts
- IRPF: Spain's personal income tax, the progressive tax on your annual income.
- Withholding: the advance payment toward your income tax that's deducted directly from your payslip or invoice.
- Effective rate: the real percentage of income tax you pay on your overall income, always lower than the marginal rate.
- Marginal rate: the percentage applied to the last euro you earn, the highest bracket you reach.
- Contribution base: the amount used to calculate your Social Security contributions.
Pension concepts
- Regulatory base: the average of your contribution bases over a reference period, the basis for calculating your pension.
- Early retirement: retiring before the standard retirement age, with a penalty applied to the amount.
- Minimum supplement: an amount that raises a low contributory pension up to the guaranteed minimum.
Savings and investment concepts
- Compound interest: interest that is also generated on previously accumulated interest, not just on the initial principal.
- Diversification: spreading your investment across different assets to reduce each one's specific risk.
- TER: an indicator that summarizes the total annual cost of an investment fund.
- Real return: the return on an investment after inflation is discounted.
- Index fund: a fund that tracks a market index, generally with low fees.
General tax concepts
- Taxable base: the amount a tax is calculated on, after applying reductions.
- Deduction: an amount subtracted directly from an already-calculated tax bill.
- Capital gain: the profit made from selling an asset for more than it cost to acquire.
Keep exploring each concept in depth
Each of these terms has its own detailed article on this blog, where we dig into how it works with practical examples. And to put any of these concepts into practice, our calculators (severance pay, mortgage, income tax, retirement pension, personal loan, VAT, compound interest, rent vs buy, and net salary) help you apply them directly to your own situation.