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Credit
| Term | Definition |
|---|---|
| Creditor | A person, bank, or company that lends money or provides goods and services with the expectation of being paid later. The creditor has the legal right to collect the money owed. |
| Capitol | Money or other financial resources available to an individual or business. In lending, capital can also refer to the borrower’s personal savings or assets that show financial strength. |
| Collateral | Property or an asset pledged to guarantee repayment of a loan. If the borrower does not repay a secured loan, the lender may take the collateral. |
| Principle | The original amount of money borrowed or the remaining balance on a loan, not including interest or fees. As payments are made, the principal balance usually decreases. |
| Financial charge | The total cost of borrowing money, including interest, loan fees, and other charges. It is usually shown on a credit agreement or loan disclosure. |
| Debt collectors | A debt collector is a person or company that attempts to collect money a borrower has not paid. A debt may be sent to collections after it becomes seriously overdue. |
| Credit Bura | A company that collects and maintains information about people’s borrowing and repayment activities. Credit bureaus use this information to create credit reports. |
| Character | A lender’s assessment of whether a borrower is responsible and likely to repay a debt. Credit history, payment habits, and honesty on loan applications may help demonstrate character. |
| Credit Report | A record of a person’s credit accounts, payment history, debts, credit inquiries, and bankruptcies. Lenders use credit reports to help decide whether to approve credit. |
| Capacity | A borrower’s ability to repay a loan based on income, employment, expenses, and existing debts. Lenders review capacity to determine whether the borrower can afford additional payments. |
| Credit History | A record of how a person has used and repaid credit over time. It includes information such as loans, credit cards, payment history, and missed payments. |
| Credit Rating | An evaluation of a person’s or organization’s creditworthiness, or ability to repay borrowed money. It is based on factors such as credit history, debt, income, and payment behavior. |
| 20/20 Rule | A budgeting guideline suggesting that total consumer debt should not exceed 20% of annual net income and monthly debt payments should not exceed 10% of monthly net income. It is a general rule, not a law, and may not apply to every type of debt. |
| Debtor | A person or organization that owes money to another party. A debtor may owe money because of a loan, credit card balance, unpaid bill, or other financial obligation. |
| Bankruptcy | A legal process that helps individuals or businesses address debts they cannot afford to repay. Depending on the type of bankruptcy, debts may be discharged, assets may be sold, or a repayment plan may be created. |
| Secured Loans | Loans backed by collateral, such as a house, car, or other valuable property. If the borrower fails to repay the loan, the lender may repossess or take the collateral. |
| Unsecured Loan | Loans that are not backed by specific collateral. Credit cards, medical bills, and many personal loans are unsecured, so lenders generally rely on the borrower’s promise and creditworthiness for repayment. |
| Reaffirmation | A legal agreement in which a borrower promises to continue paying a debt during or after bankruptcy. The borrower usually keeps the property connected to the debt, such as a car, if the agreement is approved. |
| Involuntary Bankruptcy | |
| Voluntarily Bankruptcy | |
| Discharged Debt | |
| Liquidation | |
| Reorganization |
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