Debt consolidation and useful terminology

The world of finance, like any other in the world of business or industry, has its own terms. While most of them are commonly used and will be familiar to the reader, some may not. We have compiled a simple glossary, in no particular order, that defines the definitions of some of the more commonly used terminology in the financial world. If you are engaged or pursuing debt consolidation, these terms may come in handy.

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Debit Card - Nearly identical to a credit card, but with no "pay later" provision. At the time of the sale, the cash is withdrawn directly from the buyer's checking or savings account. An easy way to buy, as it involves no cash.

Delinquency - Failure to pay, especially if the failure lasts longer than 30 days, will usually be marked on a credit report, which notes 30, 60, 90 and 120 day delinquencies. Adjustable or variable Rate - An adjustable or variable interest rate would be what a borrower would happen upon when taking out a loan that came with a rate of interest that may rise or fall over time. Many credit cards include a variable interest rate, usually based on some common financial indicator, like the Prime Rate or the London Inter Bank Offering Rate (LIBOR.)

Annual Percentage Rate - The rate of interest on a credit card or loan, expressed in terms of a rate per year. This term is sometimes abbreviated as APR.
 

Credit Card - A plastic device, traditionally issued by a bank or department store, that allows a customer to make purchases by signing his or her name. Cards allow the purchaser to offer payment later. These cards usually have a spending cap enforced by the card's issuing bank, depending upon the overall credit rating of the card's account holder. Debts not paid in full will accrue interest.

Filing for bankruptcy - Bankruptcy is the act of declaring that someone can't pay existing bills and is a formal procedure conducted in court. While filing for bankruptcy, a person could be relieved of paying some or all of his or her financial obligations. Federal law ratified recently makes it much more challenging, intricate and pricey to file for debt relief through the courts right now.

Credit Score - Also known as a FICO Score, this is a three digit score, varying from 300 upt to 850, that signifies, in a nutshell, an individual's overall credit worthiness. Borrowers with a score of 620 or better are generally believed to be excellent risks for a loan or mortgage. Individuals with less significant scores will probably have to pay less than ideal subprime rates.

Fixed Interest Rate - An interest rate that does not change over the term of the loan or repayment time period. As opposed to a Variable Rate, which can change over time.

Credit Bureau - The term is generally used to describe three companies - Experian, Trans Union and Equifax, which keep documentation of the financial transactions of Americans in order to collect them into a report.  While three major credit bureaus keep track of the large majority of financing records, they are not the only institutions that do it.

Credit Report - The actual document prepared by the credit bureau which shows a consumer's financial history, including bills paid, bills not paid, and bankruptcy filings, if any. These reports will often include the credit score.

These are but a few of the many commonly used terminology, or lingo in the financial world. The regular individual who regularly uses banks or credit unions, credit cards and loans will encounter these words quite often in the course of doing business.