Debt: a glossary of terms

Bankruptcy – Having been declared in a situation of economic insolvency. There are two types of bankruptcy: liquidation, in which your debts are discharged (discharged), and reorganization, in which you provide the court with a plan for how you are going to pay your debts.

Collateral – Property acceptable as collateral for a loan or other obligation.

Agency Collection – A company contracted by a creditor to collect a debt owed to it.

Contract – An agreement between two or more parties, generally written and required by law.

Co-sign – Endorse (signature of another), as a loan, lease or credit application. If the principal debtor does not pay, the cosigner is fully responsible for the loan or debt.

Credit bureau – An organization from which business companies request credit information about potential customers.

Credit report -An account of your credit history, prepared by a credit bureau. A credit report will contain credit history, such as what you owe to whom and whether you make payments on time, as well as your personal history, such as your previous addresses, employment history, and any lawsuits you have been involved in.

Creditor – A person or entity (such as a bank) to whom a debt is owed.

Debtor – A person or entity (such as a bank) that owes money.

Debt to income ratio – Most mortgage lenders use this index to analyze your financial well-being. It is calculated using your monthly debt divided by your monthly income. The lower the percentage, the better your financial situation. This is often called credit worthiness.

Default – Do not pay the money when it is due. A mortgage or loan default occurs when you fail to make loan payments on time, do not maintain adequate insurance, or violate some other provision of your agreement with the mortgage / credit company.

Discharge (of debts) – Judicial cancellation of the debts of a person or company that has declared bankruptcy.

Downloadable debts – Debts that can be erased through bankruptcy.

Deposit – A cash payment made by a buyer when purchasing a property.

Capital – An increase in the value of your home or a decrease in the amount of your home loan creates 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 – Fair Isaac is the company responsible for creating the popular FICO score. This three-digit score is created with information from your credit report and ranges from 300 to 850.

Mortgage’s trial – The forced sale of a property to cancel a loan in which the owner of the property has defaulted.

Embargo – A court order ordering a third party who has money or property belonging to a defendant to retain it and appear in court to answer questions.

Grace period – A period of time during which you are not obliged to make payments on a debt.

Guarantor – A person who makes a legally binding promise to pay someone else’s debt or fulfill someone else’s duty if that person defaults or defaults.

Interest – A commission you pay to a bank or other creditor for lending you money or extending your credit. It is generally calculated as a percentage of the mortgage or loan.

Link – The right to take and retain or sell the property of a debtor as collateral or payment of a debt or duty.

Loan consolidation – The combination of several loans in a single new loan. It is usually done to obtain more favorable terms, such as lower cost refunds or more time to pay.

Principal – A sum of money owed as debt, on which interest is calculated. If you bought an item for $ 100 with your credit card, that would be the principal balance.

Recovery – The taking by a creditor of a property that has been pledged as collateral for a loan.

Secured debt – A debt on which a creditor has a lien. A car loan would be an example of secured debt.

Finished – The time required to repay a loan.

Unsecured debt – A debt that is not tied to any asset. Credit card debt is an example of unsecured debt.