Debt Management Vocabulary

Here's a glossary of common terms used in debt management:

Basic Terms

• Debt: A financial obligation to repay a borrowed sum of money.
• Creditor: A person or organization that lends money.
• Debtor: A person who owes money.
• Principal: The original amount of a loan.
• Interest: A fee charged by a lender for borrowing money.

Types of Debt

• Secured Debt: Debt backed by collateral, such as a car or a house.
• Unsecured Debt: Debt not backed by collateral, such as credit card debt or personal loans.

Debt Management Strategies

• Debt Consolidation: Combining multiple debts into a single loan with a lower interest rate.
• Debt Settlement: Negotiating with creditors to pay less than the full amount owed.
• Debt Management Plan (DMP): A plan to repay debts over a fixed period, often with lower interest rates and fees.
• Bankruptcy: A legal process that allows individuals or businesses to eliminate or reduce their debt obligations.

Financial Terms

• Income: Money earned from work or investments.
• Expenses: Money spent on goods and services.
• Budget: A plan for managing income and expenses.
• Credit Score: A numerical representation of a person's creditworthiness.
• Default: Failure to make a payment on a debt.

Other Relevant Terms

• Debt Collector: A person or company that collects debts on behalf of creditors.
• Foreclosure: A legal process in which a lender takes possession of a property to satisfy a debt.
• Repossession: The taking back of property by a lender when a borrower defaults on a loan.

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