Debt Glossary of Terms
The worst part of being indebted is that even when you try escaping it, the heavy terminology used in the industry completely baffles you and makes you feel entrapped. Just like you cannot debate against a topic without having prior knowledge, it is equally difficult to settle and negotiate terms with lenders and banking services in your favour.
It is handy to know a few highly used jargons of the debt industry. Therefore, we have categorized a few for you in alphabetical order. You can also search for professional consultants using a business directory to know the legal matters before arriving at an agreement with the lenders.
Administration: Administration is the procedure by which a company is provided legal protection against an action from its creditors before arriving at a settlement solution. During administration, the company gets time to think of ways to repay the debt to the creditors.
Arrears: The unpaid portion of a debt is called Arrears. For instance, if you take out a mortgage loan from mortgage banks with monthly installments, arrears will be the amount you failed to pay in a particular month or months.
Bankruptcy: Bankruptcy is a legal tool allowing an indebted individual or business to forgo a loan on the basis of “we-cant-pay”. The assets they have kept in exchange of the loan are sold out by the lenders to make up for their loan money.
Credit/Creditor: Credit is a contract on the basis of which a borrower obtains a loan from the lender and accepts to repay it back after a certain time period. Creditor, in this context is the person or the organization which grants credit to others.
Credit Repair: A process ensuring that the financial credit reports of an individual is appropriate and updated. Credit repair is extremely beneficial so that debtors can recreate their credit and begin fresh after filing of bankruptcy.
County Court Judgment (CCJ): If you fail to repay your debit, the lenders can approach the County Court and ask them to issue a County Court Judgment enforcing you to repay the loan in whatever form suitable to you.
Debt Consolidation: Debt consolidation is way to unite all your smaller loans and pay them off by obtaining a larger loan, thereby reducing both your loan interest and stress.
Equity: Equity is the money value of a home or property after removing all the credit and charges.
Gross Income: This refers to the total income of a person after deducting the taxes and other costs like income tax, insurance, provident fund etc.
Liquidation: The process of closing down a company and converting all its assets into cash is called liquidation. This cash is basically used to pay off the company loans and debts.