Debt Glossary Terms and Meanings

ACH (Automatic Clearing House)
Nationwide fund transfers available for automatic funds, withdrawals, and variable fund transactions.

Arbitration
A hearing held for resolution concerning a dispute between disputed parties. These hearing are usually legally binding and witnessed by a third party arbitrator.

Acceleration Clause
Terms in a lease that secures the payments for the length of the lease.

Account Balance
Differences between the total debt owed and the credit to an account

Adjustable Balances
Calculation of interest used by creditors to subtract payment made during that month and addition to the balance of interest

Adjustable Rate
An interest rate that changes periodically by an increase or decrease

Annual Percentage rate (APR)
Interest rate charged annually to the card holder

Annuity
Regular payments made by an insurance company to the individual for a specific amount of time

Asset
An item that is owned by a borrower in order to receive credit against said assets

Average Daily Balance
A calculation method used by creditors to add daily balances. Each day balances are added and then divided by the total of days in the billing cycle

Bank Draft
Form of guaranteed payments via bank draft

Bankruptcy
Legal proceedings of assets when a borrower cannot pay fees that are do

Benefits
Money paid to a claimant, beneficiary or assignee of an insurance policy

Billing Cycle
Number of days from a previous billing statement to the last billing statement

Borrower
Persons receiving money with the promise to pay back with interest if applicable

Cash Out
To take the total of worth in cash instead of property

Cashier’s Check
A check drawn up by a bank or establishment and signed by the cashier to be given to a third party

Charge Off
When a creditor transfers a delinquent account to a collection agency due to nonpayment

Collateral
Some sort of asset that is held for security in case of nonpayment

Compound Interest
A process of reinvesting interest to collect more interest

Consolidation Loan
A single loan to pay off numerous loans or debts

Credit Limit
The limitation of what can be spent on a line of credit or credit card

Debt
Property, assets or money that has not been paid for yet

Debit
Money withdrawn from a bank account by another source for payment

Debt Consolidation
Refinancing of multiple debts into one debt with a lower payment and interest rate

Debt Finance
Financing by bonds, loans or cash agreements

Debt Negotiation
A process of renegotiating an agreement for payment and interest

Debtor
Person that owes money

Default
Inability to pay on an agreement in a timely manner

Delinquency
Failure to make payment on a loan in a timely manner

Direct Deposit
Money being put directly into ones account for money earned

Dischargeable Debt
Debt that one is no longer responsible usually by a bankruptcy or legal proceeding

Effective Date
Date the funds will be in effect

Electronic Fund Transfer
An electronic transfer of funds from one account to another

Equity
Money accumulated in a company or home above original costs

Fair Credit Reporting Act
A law established to protect the consumers from abusive credit card practices

Financial Aid
Usually for students to aid them in receiving an education for employment

Financing
All actions that are taken in raising funds for a business or place of residents

Fixed Rate
Where interest rates are fixed for an agreed period of time

Gift Tax
A monetary gain of a gift from another person without payment.

Grace Period
A certain amount of leniency for a payment that has not been received

Gross Income
Money earn by an individual before payment of taxes or expenses

Gross Interest
Interest earned by an individual before taxes

Income
Money earned or received by a monthly or yearly basis

Income Tax
Tax that one pays on money earned

Income verse Expense
Money coming in the home compared to money going out of the home

IndividualRetirement Account (IRA)
A tax investment account that one pays for through an employer for retirement funding

Insurance
Established payment for protection of stolen or damaged property

Interest Rate
The amount of money charged for a loan or credit

Introductory Rate
A low rate charged to borrowers for a credit program before the terms increase

Joint Account
An account owned by more than one person

Late Fee
Money charged to a consumer due to a late payment

Lease
The loan of property in exchange for payment or rent

Lender
A person or institution that lends money

Lien
Legal hold on property for payment

Line of Credit
An agreement to give credit without signature of another contract

Liquidation
Selling of ones assets in order to pay off a debt

Loan
Money borrowed that is usually repaid with interest

Lump Sum
Money owed and paid in one mount instead of by payments

Maximum Balance
Highest balance that can be accumulated by a lender through the establishment

Minimum Payment
Least payment due on an agreement of funds or property received

Mortgage
A loan to buy property

Net Worth
Differences between ones income and liabilities

Non Profit
Establishment created for services without profit

OID Debt
Original issue discount debt

Outstanding Balance
Amount that is currently owned on a debt

Overdraft
Over spending on one’s banking account that means they now owe the bank the money

Partial Payment
Payment of the partial amount that is due

Password
Letters or numbers known only to the account holder to ensure privacy

Payment Date
Date established that payment on a loan is due

Payment History
A detailed list of payments that one has made over time

Personal Loan
A loan taken out with a fix rate and fixed payments

Policy
Full details and description of a loan contract

Preapproved
An offer to receive credit by a credit establishment from investigation of a credit bureaus or payment histories

Prepayment Penalty
A charge by the lender if a loan is paid off earlier

Prime Rate
Interest rate that banks charge to special customers

Promissory Note
Promise of payment

Rate Review
A review of an account to establish if its rate should be increased or decreased

Rebate
Money given back to a consumer for a purchase

Refinance
The renewing of a loan to the same borrower usually with a better rate

Repossession
Taking back properties due to no payment or breach of contract

Secured Debt
Debt that is tied to assets or properties to ensure payment

Settlement
An agreement between the parties involved on a debt for payment less than the original amount

Simple Interest
Interest paid and calculated only to the principle

Statute of Limitations
A law that determines the time frame that a debt can be collected on

Tax Lien
Hold on ones assets due to non-payment of taxes

Term
A time period covered by a policy

Trustee
Person responsible for administrating the assets to the beneficiary of a policy

Unsecured Debt
Debt that is not tied to property or assets

Variable Annuity
Payments that are not guaranteed, but are based by the certain performance of an investment

Variable Rate
A rate that is able to move up or down at any given time

Wage Garnishment
Legal act that entitles that one’s earnings be garnished for payment of a debt

Withdrawals
Money taken from a bank establishment for funding

Write-off
A written portfolio of a debt to zero with no further collection involved

Year End
End of the accounting year for a company

Year to Date
Actual revenues and expenses on a year to year activity