Vocabulary

• Personal Debt – Money that an individual owes to creditors.
• Credit – The ability of a customer to obtain goods or services before payment, based on the trust that payment will be made in the future.
• Creditor – A person or company that lends money to others.
• Debt Consolidation – The process of combining multiple loans into one loan, typically with a lower monthly payment.
• Interest – The cost of borrowing money, typically expressed as a yearly percentage of the loan.
• Principal – The initial amount of money borrowed or still owed on a loan, not including interest.
• Repayment – The act of paying back money borrowed from a lender.
• Credit Score – A numerical expression based on a level analysis of a person's credit files, to represent the creditworthiness of an individual.
• Default – Failure to repay a loan according to the terms agreed upon in the contract.
• Bankruptcy – A legal status of a person or other entity who cannot repay debts to creditors.
• Credit Report – A record of an individual's or company's past borrowing and repaying, including information about late payments and bankruptcy.
• Loan Term – The period of time during which a loan must be repaid.
• Secured Debt – A debt in which the borrower pledges some asset as collateral for the loan.
• Unsecured Debt – A debt that is not backed by any asset.
• Credit Card – A card issued by a bank allowing the holder to purchase goods or services on credit.
• Mortgage – A loan to finance the purchase of real estate, usually with specified payment periods and interest rates.
• Loan – A sum of money that is expected to be paid back with interest.
• Lender – A person or organization that lends money.
• Borrower – An individual or company borrowing money from a lender.
• Annual Percentage Rate (APR) – The yearly rate of interest charged on a loan.
• Credit Limit – The maximum amount a credit card company or financial institution will allow someone to borrow.
• Debt Collection – The process of pursuing payments of debts owed by individuals or businesses.
• Overdraft – A deficit in a bank account caused by drawing more money than the account holds.
• Late Payment – A payment made after the due date.
• Collateral – An asset that a borrower offers as a way for a lender to secure the loan.
• Line of Credit – A pre-approved amount of money a borrower can draw upon when needed.
• Payday Loan – A small, short-term unsecured loan, regardless of whether repayment is linked to a borrower's payday.
• Debt Relief – The partial or total forgiveness of debt, or the slowing or stopping of debt growth.
• Installment Loan – A loan that is repaid over time with a set number of scheduled payments.
• Equity – The difference between the value of the assets/interest and the cost of the liabilities of something owned.
• Credit Counseling – Professional guidance provided by organizations to help consumers handle their debt.
• Interest Rate – The proportion of a loan that is charged as interest to the borrower.
• Debt-to-Income Ratio (DTI) – A personal finance measure that compares an individual's debt payment to his or her overall income.
• Fixed Interest Rate – An interest rate on a loan that remains the same throughout the term of the loan.
• Variable Interest Rate – An interest rate on a loan that fluctuates over time because it is based on an underlying benchmark interest rate or index.
• Minimum Payment – The smallest amount of a credit card bill that a consumer can pay, to remain in good standing with the credit card company.
• Foreclosure – The action of taking possession of a mortgaged property when the mortgagor fails to keep up their mortgage payments.
• Amortization – The process of reducing a debt over a period of time through regular payments.
• Refinancing – The process of replacing an existing loan with a new loan, typically with better terms.
• Personal Loan – A loan that is issued and supported only by the borrower's creditworthiness, rather than by any type of collateral.
• Auto Loan – A loan used to purchase a vehicle.
• Student Loan – A loan offered to students which is used to pay off education-related expenses.
• Home Equity Loan – A type of loan in which the borrower uses the equity of his or her home as collateral.
• Credit History – A record of a borrower's responsible repayment of debts.
• Loan Officer – A representative of a bank, credit union, or other financial institution who assists borrowers in the application process.
• Credit Union – A nonprofit-making money cooperative whose members can borrow from pooled deposits at low interest rates.
• Debt Snowball Method – A debt reduction strategy, whereby one who owes on more than one account pays off the accounts starting with the smallest balances first.
• Debt Avalanche Method – A debt reduction strategy, whereby one who owes on more than one account pays off the accounts with the highest interest rate first.
• Balance Transfer – The transfer of debt from one credit card account to another with a lower interest rate.
• Creditworthiness – An assessment of the likelihood that a borrower will default on his or her debt obligations.