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Debt advice the jargon buster

Debt Management

The worry of being in debt is bad enough but not understanding the terms used in the debt advice you're getting only adds to the problem. Use our simple jargon buster to keep on top of it all.

Adverse credit: having a bad credit history after defaulting on repayments, having a county court judgment against you or declaring bankruptcy

Amortization: the process of fully paying off debts by installments over a definite time

APR (Annual Percentage Rate): the total interest charged on a loan or mortgage; the figure is designed to measure the true cost of the loan

Ticks!


Arrears: money owed that should already have been paid

Asset: anything owned by an individual that has a cash value

Bad credit: see adverse credit

Debt collector: an individual employed, usually by the court, to enter your house and recover goods to be auctioned to pay off your debt

Balance owing: the outstanding amount owed

Bankrupt: declared in law unable to pay your debts and forced to surrender property to a receiver for administration and distribution to creditors

Broker: a person that sources financial products for a client

CCJ (County Court Judgment): a court order against a borrower that has defaulted on credit repayments

Collateral: property that is used to secure a loan and may be seized if the borrower defaults on repayments

Commission: a sum paid to an agent for carrying out duties on behalf of a client

Credit agreement: a legally binding agreement between borrower and lender outlining the terms and conditions of the loan

Credit history: your record of borrowing and repayment of loans in the past

Credit reference agency: a company that provides lenders with individuals' credit history details

Credit score: a statistical evaluation made by a lender to calculate the level of risk you pose as a borrower

Credit search: a search carried out by a credit reference agency to check your credit history

Daily interest: interest calculated on a daily rather than a monthly basis

Debt consolidation loan: a loan taken out to pay off an individual's existing debt

Debt: money owed to creditors or lenders

Depreciation: the decreasing value of an asset over time

Default: failure to meet the terms of the credit agreement

Default notice: a notice issued by a creditor telling the borrower that the company intends to take steps to recover arrears or unpaid debts

Equity: the value of a property less any money owed on it

Fixed interest rate: a predetermined rate of interest fixed for the duration of the loan

Hire purchase: the purchase of an item that is kept in the debtor's possession as long as repayments are made as agreed. When full payment has been made the item becomes the property of the debtor.

Impound: to seize an item and take legal custody of it

Insolvent: having insufficient money to repay debts owed

Liability: your legal responsibility to repay your debt

Mortgage: a loan to purchase a home

Negative equity: when the value of a property is worth less than the money owed on it

Principal: the amount of the loan

Secured loan: money borrowed that is secured on an asset such as a car, furniture or house. If the debt is not repaid the lender can demand the auction of the asset in order to repay the loan.

Term: the length of time over which the loan is repaid

Unsecured loan: a personal loan where no security is needed to guarantee repayment

Variable rate interest: an interest rate that may fluctuate over the period of the loan