click below
click below
Normal Size Small Size show me how
Credit Vocab
Term | Definition |
---|---|
1. Creditor | A party to whom money is owed. |
2. Capital | Wealth in the form of money or assets, taken as a sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment. |
3. Collateral | Specific asset pledged as a secondary security by a borrower or guarantor. |
4. Principal | Capital as distinct from the income (interest) derived from it. |
5. Finance charge | Total cost of borrowing, including interest charges, commitment fees, and other charges paid by the borrower for availing the loan facility. See also cost of capital. |
6. Debt collector | A company or agency that is in the business of recovering money that is owed on delinquent accounts. |
7. Credit bureau | a company that collects information relating to the credit ratings of individuals and makes it available to credit card companies, financial institutions, etc. |
8. Character | One of the five key factors (see five C's of credit) considered in evaluation of a loan application is the applicant's credit history and reputation in the community. |
9. Credit report | Document supplied by a bank or a credit reporting agency (such as Dun & Bradstreet) that summarizes an entity's credit history and present financial position, and notifies about any lien in force or pending judgment(s) against the entity. |
10. Capacity | Borrower's ability to repay a debt on a timely basis, determined by deducting total cash outflows from the borrowers total income during (usually) a month. |
11. Credit history | a record of a borrower's responsible repayment of debts. A credit report is a record of the borrower's credit history from a number of sources, including banks, credit card companies, collection agencies, and governments |
12. Credit rating | Evaluation of the timely repayment ability of an individual, firm, or debt security |
13. 20/10 rule | Money borrowed should total below 20% of your annual after-tax income; not including mortgage/rent. Payments on all the loans and credit cards should be no more than 10% of your monthly after-tax income. |
14. Debtor | A person who owes money. |
15. Bankruptcy | Legal procedure for liquidating a business which cannot fully pay its debts out of its current assets. |
17. Unsecured loans | Loan extended only on the basis of the borrower's financial position, creditworthiness, credit history, and general reputation. The borrower signs a promissory not but does not pledge any specific asset(s) as collateral. |
18. Reaffirmation | An agreement made between a debtor and a creditor to repay some or all of a debt. Reaffirmations are made on a purely voluntary basis by the debtor. |
19. Involuntary bankruptcy | The process where creditors petition the court to begin bankruptcy proceedings on a debtor. |
20. Voluntary bankruptcy- | type of bankruptcy where an insolvent debtor brings the petition to a court to declare bankruptcy because he or she or it is unable to pay off debts. |
21. Discharged debts | The cancellation or forgiveness of a debt. |
22. Liquidation | Winding up of a firm by selling off its free assets to convert them into cash to pay the firm's unsecured creditors. .]. Liquidation process is initiated either by the shareholders or by the creditors after obtaining court's permission. |
23. Reorganization | Readjustment of a firm's debt and capital structure after a bankruptcy or receivership order. |
24. Secured Loan | Loan agreement under which a borrower pledges a specific asset or property which the lender can seize in case of default. |