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| Term | Definition |
|---|---|
| Creditor | A creditor is a person, company, or institution that is owed money by another party. |
| Capital | The financial value of assets, such as cash or property, owned by a person or company. |
| Collateral | An asset pledged by a borrower to a lender as security for a loan. |
| Principal | The original amount of money borrowed or invested, excluding interest. |
| Finance charge | The total cost of credit, including interest and fees, expressed as a dollar amount. |
| Debt collector (collection) | A person or agency hired to recover overdue or unpaid debts from a borrower. |
| Credit bureau | An agency that collects and researches individual credit information and sells it to creditors. |
| Character | borrower's reputation, reliability, and past record of paying debts on time |
| Credit report | A detailed record of an individual's credit history maintained by credit bureaus. |
| Capacity | A borrower's ability to repay a loan based on current income and debt obligations. |
| Credit history | A record of a person's past borrowing and repayment performance. |
| Credit rating | An evaluation or score of a borrower's creditworthiness and risk level. |
| 20/10 rule | A guideline stating that total borrowing should not exceed 20% of annual net income, and monthly payments should not exceed 10% of monthly net income. |
| Debtor | A person or entity that owes money to another party. |
| Bankruptcy | A legal proceeding involving a person or business that is unable to repay outstanding debts. |
| Secured loans | Loans backed by collateral that the lender can seize if the borrower defaults. |
| Unsecured loans | Loans not backed by collateral, relying only on the borrower's creditworthiness. |
| Reaffirmation | A formal agreement by a debtor to pay a discharged debt during or after bankruptcy proceedings. |
| Involuntary bankruptcy | A legal process where creditors file a bankruptcy petition against a debtor who is not paying debts. |
| Voluntary bankruptcy | A legal proceeding where a debtor files a petition for bankruptcy on their own accord. |
| Discharged debts | Debts that a bankrupt person or business is legally released and no longer required to pay. |
| Liquidation | The process of selling a bankrupt debtor's non-exempt assets to pay off outstanding claims to creditors. |
| Reorganization | the process of changing the legal, operational, financial, or structural arrangement of a business or system to improve performance and efficiency. |
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