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Financial Literacy
Credit vocab
| Term | Definition |
|---|---|
| Creditor | A person, financial institution, or other business that lends money. |
| Capital | Wealth in the form of money or other assets owned by a person or organization. |
| Collateral | An asset that a person offers to secure a loan, promising to give the asset to the lender if loan payments cannot be met. Collateral also refers to the collection of receivables, such as mortgages. |
| Principal | Most commonly refers to the initial amount of a loan; but can also refer to the amount still owed on a loan. |
| Financial Charge | Also known as a Financing Fee, it is the additional cost for using credit or extending credit, generally charged as a flat fee or a percentage (interest) of the funds borrowed. |
| Debt Collector (Collection) | A debt collector is defined as any person or business that regularly collects or attempts to collect, directly or indirectly, consumer debts owed or due to another. |
| Credit Bureau | Credit bureaus are private companies that collect financial and personal data from lenders to compile your credit reports and history. |
| Character | Character refers to a borrower's reputation, track record, and trustworthiness regarding debt repayment |
| Credit Report | A loan and bill payment history, kept by a credit bureau and used by financial institutions and other potential creditors to determine the likelihood that a borrower will repay future debt. |
| Capacity | Capacity is a borrower's ability to repay debt based on their cash flow, income, and existing financial obligations. |
| Credit History | A record of how a person has borrowed and repaid debt. |
| Credit Rating | An estimate of the amount of credit that can be extended to an individual or business without undue risk to the lenders. |
| 20/10 Rule | The 20/10 rule is a personal finance guideline used to manage and limit consumer debt. |
| Debtor | A debtor is an individual, company, or government entity that borrows money or buys something on credit and owes repayment to a lender or creditor. |
| Bankruptcy | The inability of a person or organization to pay their outstanding debts. The process begins with a petition filed by the debtor (which is most common), or on behalf of creditors. |
| Secured Loans | A secured loan is a type of loan backed by a borrower's asset, which acts as collateral. |
| Unsecured Loans | An unsecured loan is a debt that does not require any property or assets as collateral. |
| Reaffirmation | Reaffirmation in finance and bankruptcy is a voluntary agreement where a debtor promises to repay a specific debt that would otherwise be wiped out (discharged) by bankruptcy proceedings. |
| Involuntary Bankruptcy | An involuntary bankruptcy is one filed by someone other than the debtor. |
| Voluntary Bankruptcy | Voluntary bankruptcy is a bankruptcy proceeding that a debtor initiates because they cannot satisfy the debt. |
| Discharged Debt | A discharged debt is a legal release from personal liability for a specific financial obligation, meaning the borrower is no longer legally required to pay it back. |
| Liquidation | Liquidation is the process of converting a company's assets into cash to pay off creditors and shareholders, usually signaling the end of business operations. |
| Reorganization | Reorganization in a financial sense is the restructuring of a company's ownership, operational, legal, or capital structure to improve financial health, resolve distress, or change strategic direction |
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