Manage Your Finances
 

Debt Glossary

Debt
Money that is owed to an individual or a company (creditors)

Debt Consolidation
Debt consolidation is a way of bringing all of your debts together with a loan, so you just make one monthly payment and deal with one company. Debt consolidation allows you to arrange payments you know you can afford, so you will know exactly how much your debt will cost you each month.

EAR
Initials that are short for Effective Annual Rate. EAR is the amount of interest that is charged on an overdraft or loan and it is stated as an annual rate. Unlike APR, EAR doed not include any additional fees or charges.

Guarantor
A person who will guarantee mortgage or loan repayments will be made the borrower’s behalf.

Interest
Interest is essentially the charge you pay to be able to borrow money. Interest will be displayed as a percentage rate over a period of time. Commonly used types of interest include APR and EAR.

Loan shark
Unregulated lenders offering loans to those who wouldn’t be accepted elsewhere. Loan sharks will usually charge very high interest rates on loans and will often engage in unscrupulous behaviour. It is not uncommon for loan sharks to demand repayment by blackmail or threat of violence. To be avoided.

Outstanding Balance
The amount of borrowed money that is yet to be repaid to the lender of your loan.

Penalty Charges
A fee charged by your lender for breaking the borrowing agreement. Penalty charges can be incurred for late or missed payments.

Personal Loan
Loans offered by banks and other lenders to individuals for personal use. Repayment periods of personal loans usually vary from one year to five years.

Secured Loan
A secured loan is ‘secured’ against an asset such as your property or car. ‘Secured’ means should you fail to keep up payments, the lender has the right to reclaim the loan value from the asset. As secure loans carry a large risk, the borrower will be able to benefit from a lower rate of interest. Secured loans are usually used for larger sums of money or for mortgages.

Unsecured Loan
An unsecured loan is a loan not ‘secured’ to an asset. With an unsecured loan, lenders do not automatically have a right to reclaim the value of your loan from your assets if you fail to keep up with payments. Unsecured loans do still have severe penalties if you miss payments.

Variable-rate interest
Interest paid on a loan or mortgage that can increase or decrease. Variable-rate interest is usually in line with the base rate set by the Bank of England.

Debt Consolidation

Arrears
When payments on a loan agreement are missed, late or underpaid.

Assets
Any item, you possess that is of financial value. Typical examples of assets include property, a vehicle etc.

APR
Initials that are short for Annual Percentage Rate. APR is the interest payable on the amount that has been borrowed. APR quantifies the total charge for credit as a standard measure that can be used to compare credit charges from one lender to another.

Bankruptcy
This should only ever be last resort for anyone struggling with serious debt problems. Bankruptcy means the debtor cannot afford to make any repayments on their debts. With bankruptcy comes many serious consequences including the sacrifice of all assets, restrictions on employment, restrictions on gaining credit for a number of years and advertisement of the bankruptcy in the press.

Blacklisted
If an individual has a very poor credit history, they stand the chance of being blacklisted. Being blacklisted means a not will be put against their credit file that says they are a severe lending risk.

Consolidation Loan
A consolidation loan is a loan that is used to bring all of your debts together. With a consolidation loan, you make just one monthly payment and deal with one company. Debt consolidation allows you to arrange payments you know you can afford, so you will know exactly how much your debt will cost you each month. A consolidation loan can be used to pay off multiple forms of debt including credit cards, store cards, overdrafts etc.

Creditor
An individual or an organisation that you owe money to.

Default
When you are in payment arrears as you are at least 30 days behind with the repayment of your debt. Defaulting on a loan agreement can lead to legal action including County Court Judgements (CCJs)

Disposable Income
Money left over from your income, once you have made of all your essential expenditure each month including living costs and the payment of secured debts. Also known as surplus income.

Hire Purchase (HP)
A form of credit where you are essentially hiring an item for a certain period of time and making a monthly payment to do so. Usually a form of credit used for cars. Hire Purchase agreements cannot be included in debt consolidation.

Late Fees
Additional charges that have to be paid if you make late repayments of your debts to your creditors. Debt consolidation can help with late fees as you will only have one creditor to pay, so it will be easier to manage your finances.

Second charge mortgage
A second charge mortgage is a loan that is borrowed against the equity in the borrower’s property. It is called a second charge mortgage because it is in addition to the first mortgage.

Bankruptcy

Bankruptcy Order
Issued by a County or the High Court in London, a Bankruptcy Order will issued as a result of a petition for bankruptcy  by either a creditor or debtor. It will set out the terms of the bankruptcy, the length of the bankruptcy, the treatment of assets and any special conditions that may need to be applied.

Bankruptcy petition
Either made by you as the debtor or a creditor you owe more than £750 to, a bankruptcy petition is the document needed to be submitted to the court to initiate a bankruptcy.

Creditor
A lender who you owe money to.

Debtor
An individual who owes money and is facing bankruptcy.

Discharged Bankrupt
An individual who has had their debts written off by bankruptcy.

Insolvency Practitioner
A person who is licensed to deal with insolvency cases. An Insolvency Practitioner will have to set up your bankruptcy and administer it.

Official Receiver
A civil servant in The Insolvency Service and an officer of the court. It is the role of the Official Receiver to be responsible for the administration of the bankruptcy. The Official Receiver will usually conduct an interview with the bankrupt and it is their decision as to whether the bankrupt’s assets should be sold to recoup money owed to creditors.

Trustee
Either the Official Receiver or an Insolvency Practitioner who will take control of your assets. It is the job of the Trustee to sell the debtor’s assets and share the proceeds amongst the creditors.

Trust Deeds

Creditor
An individual or an organisation that you owe money.

Debtor
An individual who owes money.

Insolvency Practitioner
A person who is licensed to deal with insolvency cases. An Insolvency Practitioner will have to set up your Trust Deed and administer it.

Protected Trust Deed
A way of ‘Protecting’ a Trust Deed ensuring that no further action can be taken against you by your creditors for recovery of the money you owe them.

Sequestration
The legal taking of the bankrupt’s estate by order of the court for the benefit of the creditors.

IVA

Arrears
Missed payments on contractual agreements including mortgages, loans, rent etc.

Assets
Items you own that have monetary value, includes property, cars etc

Credit file
a credit file holds information regarding monies someone has borrowed, applications they have made for borrowing and notes if repayments of monies they have borrowed have been made satisfactorily or not. Anyone can obtain a copy of their own credit file from either “Experian” or “Equifax”, for a small administration fee of £2. It also holds information on dates of bankruptcy.

Creditor
An individual or an organisation that you owe money.

Insolvency Practitioner
A person who is licensed to deal with insolvency cases. An Insolvency Practitioner will have to set up your IVA and administer it.

Secure debts
Borrowed money that is secured against an asset, e.g. a house or a car. Failure to make payments could mean sale or return of the asset, the money was secured against. Secure debts cannot be included in an IVA.

Unsecured debts
Borrowed money not secured on any asset or property. Loans, credit cards and store cards are all unsecured debts and can be included in an IVA.

Insolvency

Assets
Anything that belongs to the debtor that has monetary value and can be used to contribute towards their debts. A bankrupt will usually be able to keep the following items:
Tools, books, vehicles and other items of equipment which are needed for their employment
Clothing, bedding, furniture, household equipment etc.

Bankrupt
An individual whom a bankruptcy order has been made.

Bankruptcy order
A bankruptcy order is made by the court after a bankruptcy petition has been presented and has been accepted. Usually it is presented by the debtor or by one of more of the debtor’s creditors who are owed at least £750 in unsecured debt.

Compulsory liquidation
The winding up of a company when a bankruptcy petition has been made (usually by a creditor) and accepted by the court.

Creditor
Someone whom the bankrupt owes money

Dividend
Any sum of money that is distributed to unsecured creditors in an insolvency case

Estate
The assets and property of a bankrupt which the Trustee has been legally appointed to deal with

Insolvency practitioner
A person who is licensed to deal with insolvency cases. Insolvency Practitioners are usually accountants or solicitors and will be authorised by either the Secretary of State or a number of other recognised professional bodies.

Official Receiver
A civil servant in The Insolvency Service and an officer of the court. It is the role of the Official Receiver to be responsible for the administration of a bankruptcy. The Official Receiver will usually conduct an interview with the bankrupt and it is their decision as to whether the bankrupt’s assets should be sold to recoup money owed to creditors.

Open Case
A current case that is being dealt with an Official Receiver.

Petition
A formal application made to a court for a bankruptcy case either by the debtor themselves or by a creditor owed more than £750 in unsecured debt

Realise
To realise an asset is when the Official Receiver or Trustee will sell it to raise money to put towards paying the bankrupt’s debts.

Statement of affairs
Sworn under oath at court, the statement of affairs is a document completed by a bankrupt that states the assets they possess, who they owe money to and how much they owe them.

Trustee
The trustee in bankruptcy is either an official receiver or an insolvency practitioner who takes control of the assets. The trustee’s main duties are to sell these assets and share the money out amongst the creditors.

Debt Relief Order

Assets
Anything that belongs to the debtor that has monetary value, to be eligible for a Debt Relief Order, you cannot have assets of over £300. You are however allowed to own a vehicle up to the value of £1000 (if you have a physical disability and require a specially adapted car, this is not applicable).

Creditor
An individual or organisation to whom you owe money.

Debtor
An individual who owes money to a creditor.

Moratorium Period
The period of time covered by a Debt Relief Order, where your debts receive legally protection meaning your creditors can no longer pursue you for payment. After the moratorium period ends, the debts will usually be written off, unless the Debt Relief Order is revoked.

Official Receiver
A civil servant in The Insolvency Service and an officer of the court. It is the role of the Official Receiver to be responsible for the administration of a Debt Relief Order.

Debt Management Plan

Arrears
When payments on contractual agreements including mortgages, loans rent etc. are missed, late or underpaid.

Assets
Anything that own that have monetary value, examples include property, cars etc.

Contractual payments
Payments that you agree to make each month when a contractual agreement is signed.

Creditor
Someone to whom a debt is owed.

Credit File
A file held by authorised companies containing a individual’s financial history, it includes credit applications and money that has been borrowed.

Debt Consolidation Loan
Instead of paying your debts separately, a debt consolidation loan will bring your debts together so you just make one monthly payment and only deal with one company.

Debtor
Someone in debt

Deficit
The amount by which monthly expenditure exceeds monthly income.

Payment Protection Insurance
Known as PPI, this is an insurance policy taken out alongside mortgages, personal loans, credit cards and many other types of finance. A PPI policy is designed to cover your monthly finance repayments when you are unable to pay them. A PPI policy will cover you if you are made redundant or if you are unable to work due to accident, illness or injury. Also sometimes known as Loan Protection Insurance or Accident, Sickness and Unemployment (ASU) cover.

Secure debts
Money that has been borrowed is secured against an asset, e.g. a house or a car. Failure to make payments could mean sale or return of the asset, the money was secured against.

Unsecured debts
Borrowed money not secured on any asset or property. Loans, credit cards and store cards are all unsecured debts.

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Halsway Manor Debt Management - Helping you live a life free from the stress & worry of debt.

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