Debt a Glossary of Terms

Bankruptcy - Having been legally declared financially insolvent. There are two types of bankruptcy - liquidation, in which your debts are cleared (discharged) and reorganization, in which you supply the tribunal with a program for how you mean to refund your debts.

Collateral - Property acceptable as security for a loan or other obligation.

Collection Agency - A company hired by a creditor to accumulate a debt that it is owed.

Contract - An understanding between two or more than parties, usually written down and enforceable by law .

Cosigner - To back (another's signature), as a loan agreement, rental or credit application. If the primary debtor makes not pay, the cosignatory is fully responsible for the loan or debt.

Credit Bureau - An organisation to which business firms apply for credit information on prospective customers.

Credit Report -An account of your credit history, prepared by a credit bureau. A credit report will incorporate credit history, such as as as as as what you owe to whom and whether you do the payments on time, as well as personal history, such as your former addresses, employment record and any lawsuits in which you have got been involved.

Creditor - A individual or physical thing (such as a bank) to whom a debt is owed.

Debtor - A individual or physical thing (such as a bank) who owes money.

Debt to Income Ratio - Most mortgage lenders utilize this ratio to analyse your financial well-being. It is figured by using your monthly debt divided by your monthly income. The lower the percentage the better your financial picture. This is often referred to as credit worthiness.

Default - To neglect to pay money when it is due. A default on a mortgage or loan takes topographic point when you neglect to do the loan payments on time, neglect to keep adequate insurance or go against some other proviso of your understanding with the mortgage / loan company.

Discharge (of debts) - A court's authorship of off the debts of a individual or business that have filed for bankruptcy.

Dischargeable Debts - Debts that tin be erased by going through bankruptcy.

Down Payment - A cash payment made by a buyer when they purchase a property.

Equity - An addition in the value of your home or lessening in the loan amount on your home makes equity. Equity is the difference between what is owed on your home and the sale value. Most home equity lenders will allow you to borrow up to 80% of that value.

Fair Isaac and Company - Carnival Isaac is the company responsible for creating the popular FICO score. This three figure score is created using information from your credit report and ranges from 300-850.

Foreclosure - The forced sale of property to wage off a loan on which the proprietor of the property have defaulted.

Garnishment - A tribunal order directing a 3rd political party who throws money or property belonging to a suspect to keep back it and look in tribunal to reply inquiries.

Grace Period - A clip period of time during which you are not required to do payments on a debt.

Guarantor - A individual who do a legally binding promise to either pay another person's debt or execute another person's duty if that individual defaults or neglects to perform.

Interest - A committee you pay a bank or other creditor for lending you money or extending you credit. Usually calculated as a percentage of the mortgage or loan.

Lien - The right to take and throw or sell the property of a debtor as security or payment for a debt or duty.

Loan Consolidation - The combining of a number of loans into a single new loan. Usually done to derive more than favourable terms e.g. lower cost repayments or longer clip to pay.

Principal - A sum of money of money owed as a debt, upon which interest is calculated. If you purchased an point for $100 on your credit card that would be the principal balance.

Repossession - A creditor's pickings of property that have been pledged as collateral for a loan.

Secured Debt - A debt on which a creditor have a lien. A car loan would be an illustration of secured debt.

Term - The clip required to refund a loan.

Unsecured Debt - A debt that is not tied to any point of property. Credit card debt is an illustration of unsecured debt.