Glossary of terms
APR
Arrears
Assets
Attachment of Earnings
Bankruptcy
County Court Judgment (CCJ)
Credit History
Credit Reference Agency
Credit Score
Creditor
Debt Collection
Debt Consolidation
Debt Management
Debtor
Equifax/Experian
Equity
Insolvency/Insolvent
IVA
Secured Loans
Sequestration
Trust Deed
Unsecured Loans
APR
How much it is costing you to borrow per year, expressed as a percentage of the loan amount, used as a guide in order to compare the cost of different loans.
Arrears
The amount of overdue payments on a debt.
Assets
Property and possessions or anything of value that you own.
Attachment of earnings
If you are not repaying debts as agreed through the Court they can notify your employer to deduct an agreed amount before paying your wages which will then be used to repay your debts.
Bankruptcy
If you are unable to repay your debts it is possible for you to be declared bankrupt. In this case any assets you have can be used to raise money, which is then distributed to your creditors.
County Court Judgment (CCJ)
Creditors may take court action if they have problems communicating with you or getting you to make payments off your debts. This will usually result in additional costs being added to your debt. After considering your circumstances the Court will usually stop interest being charged and agree a regular amount that you should repay and this will be reflected in the Judgment(s). A CCJ will normally be recorded on your credit record for a period of six years.
Credit History
A record of a persons ‘borrowing’ within a period of time that shows how much you may owe and your payment habits, it is used by lenders to gauge your credit risk.
Credit Reference Agency
There are three main credit reference agencies operating in the UK. They are supplied with information about you including the way you handle your existing debts. Any problems will be noted and could stop you getting credit in the future. Each reference agency will supply the record it holds about you for £2* but you need to supply your name and all addresses at which you have lived in the past six years. If the information is inaccurate you can insist on a correction. The main agencies are listed in the Useful Contacts section.
Credit Score
When you apply for credit, a mortgage or even to open a bank account, you may be credit scored. Points will be awarded for previous good credit handling, and you will also benefit from a good job, having lived for a long time in your present home and the like. If you do not meet a minimum “score” you will be declined. Companies do not have to explain why they have turned you down but must give you details of any credit reference agency they have used.
Creditor
Someone – an individual or an organisation – who is owed money.
Debt Collection
This usually refers to an organisation that has been appointed to collect money you owe to another firm. In some cases such an organisation will actually “buy” your debt and so replace the firm to which you originally owed money. Some may call at your home but there are laws governing what action they can take.
Debt Consolidation
Replacing a variety of different ‘borrowings’ (e.g. credit cards, store cards, overdrafts and loans) with a single loan, which is taken out over a longer period in order to reduce the size of the monthly repayments.
Debt Management
Debt management companies will help you to manage your debt payments and deal with your creditors.
Debtor
Someone who owes money.
Equifax/Experian
Two of the main credit reference agencies, who hold information on applicants seeking forms of credit. See Credit Reference Agency.
Equity
The difference between the market value of your home and the outstanding balance on your mortgage.
Insolvency/Insolvent
Being unable to repay your debts.
IVA
An Individual Voluntary Arrangement is a legally binding agreement between you and your creditors where you pay an agreed amount over a fixed term – usually five years- and can only be administered by an Insolvency Practitioner. Once agreed, your creditors cannot add or change the arrangement without your consent. At the end of the period, any remaining debt is written off.
Secured Loans
A loan that is backed by the assets of the borrower such as their home, in order to decrease the risk taken on by the lender.
Sequestration
The Scottish court’s equivalent of Bankruptcy, sequestration is the seizure of debtors assets on behalf of their creditors.
Trust Deed
A trust deed is part of Government legislation that is designed to help Scottish residents clear debt. It is a formal agreement, conducted by an Insolvency Practitioner, between you and your creditors where you agree to pay a lower, fixed monthly payment, usually over three years. After your Trust Deed is completed, any remaining debt is written off.
Unsecured Loans
A loan taken on without the borrowers assets as security.
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