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Credit
| Term | Definition |
|---|---|
| Creditor | a lender or institution that provides money or credit to a borrower through a pure financial contract, such as a loan, bond, or debt security, expecting repayment with interest |
| Capital | the process of raising and managing long-term funds that organizations use to buy major assets, build infrastructure, or expand operations |
| Collateral | a valuable asset that a borrower pledges to a lender to secure a loan and reduce the lender's risk |
| Principal | the original amount of money borrowed, lent, or invested, not counting any interest, fees, or earnings |
| Finance charge | the total cost you pay to borrow money or use credit, including both interest and extra fees |
| Debt collector (collection) | is a person or business that regularly collects or attempts to collect past-due debts owed to another party, or a company that buys defaulted debts to collect them for itself |
| Credit bureau | a private company that collects financial and personal data about consumers to build credit reports and calculate credit scores for lenders |
| Character | a borrower's reputation, trustworthiness, and historical track record of repaying debts |
| Credit report | a detailed record of your credit history and financial behavior compiled by a credit reporting agency |
| Capacity | a borrower's financial ability to repay a loan. Lenders evaluate capacity to ensure timely repayments without putting undue strain on the borrower's budget |
| Credit history | a detailed record of how you borrow and repay money over time |
| Credit rating | an independent evaluation of the creditworthiness of a business, government, or specific debt obligation, predicting how likely the borrower is to repay its debts on time |
| 20/10 rule | The 20% Limit (Total Debt): Your total outstanding consumer debt should not exceed 20% of your annual net income. The 10% Limit (Monthly Payments): Your total monthly debt payments should not exceed 10% of your monthly net income. |
| Debtor | an individual, company, or legal entity that owes money or has a financial obligation to another party |
| Bankruptcy | a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. |
| Secured loans | a type of loan backed by an asset or property that serves as collateral |
| Unsecured loans | a debt product that does not require collateral, relying instead on the borrower's creditworthiness and promise to repay |
| Reaffirmation | a voluntary legal contract where a debtor promises to repay a specific debt that would otherwise be wiped out in a bankruptcy proceeding |
| Involuntary bankruptcy | creditors force the company into bankruptcy |
| Voluntary bankruptcy | a bankruptcy proceeding that a debtor initiates because they cannot satisfy the debt |
| Discharged debts | a legal release from personal liability for a specific debt, meaning the borrower is no longer required to pay it and creditors cannot try to collect it |
| Liquidation | the process of converting a company's assets into cash to pay off creditors and shareholders |
| Reorganization | a major change to a company's ownership, legal structure, operations, or financial arrangement |
Created by:
RuggerMan