Glossary of Debt Terminology
Debt Settlement: A negotiation between a debtor and their lender with the purpose of agreeing to a reduced amount due. Some debtors who work with settlement companies like Liberty Debt Relief may even cut their debts in half!
Debt Consultant/Specialist: Experienced and knowledgeable professionals who are trained to meditate debt negotiations with creditors in order to bring about favorable terms for both lenders and debtors. This may include the repayment period, interest rates, or even the total amount due.
Delinquency: An account status brought on when a debtor misses a payment based on the loan agreement terms and set due dates.
Secured Debt: A loan or line of credit that is backed by collateral, such as a vehicle, home, or other assets. Typically, these types of loans offer more favorable terms.
Unsecured Debt: A loan or line of credit that is not supported by any assets. This includes credit cards and most personal loans. Because these types of loans and credit lines are riskier for the lender, they sometimes have less favorable terms.
Principal: The amount borrowed by the debtor, not including any fees or interest rates.
Accrued Interest: This is calculated based on the unpaid balance and will build until the debt is paid off completely. This is typically why it is harder to pay off debts with high interest rates because, the higher the interest due, the less money from a payment goes towards the overall principal.
Forbearance: A postponement of loan repayments granted by creditors when the debtor is experiencing a financial hardship and cannot make payments temporarily.
Garnishment: When a portion of an employee’s’ wage is held to pay a lender until the balance is paid off.
Debt Consolidation: A separate loan, typically with a lower interest rate, in which a debtor combines all their debt into one monthly payment.
Credit Repair: Disputing errors on your credit report, such as late payments that were actually paid on time or duplicate charges, with your creditors and various credit report companies.
Debt Management: A plan set up for debtors by credit counselors, which includes working with lenders and negotiating lower interest rates for unsecured debt. This will reduce the amount paid over time.
Federal Trade Commission (FTC): A government agency that protects consumer and debtor rights by enforcing consumer protection laws.