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Credit Vocab

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.
Created by: s.andrew.wilson