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Equity - An increase in
value of your home or decrease in loan amount on your home creates equity. Equity is difference between what is owed on your home and sale value. Most home equity lenders will allow you to borrow up to 80% of that value.
Fair Isaac and Company - Fair Isaac is company responsible for creating popular FICO score. This three digit score is created using information from your credit report and ranges from 300-850.
Foreclosure - The forced sale of property to pay off a loan on which owner of property has defaulted.
Garnishment - A court order directing a third party who holds money or property belonging to a defendant to withhold it and appear in court to answer inquiries.
Grace Period - A period of time during which you are not required to make payments on a debt.
Guarantor - A person who makes a legally binding promise to either pay another person's debt or perform another person's duty if that person defaults or fails to perform.
Interest - A commission you pay a bank or other creditor for lending you money or extending you credit. Usually calculated as a percentage of mortgage or loan.
Lien - The right to take and hold or sell property of a debtor as security or payment for a debt or duty.
Loan Consolidation - The combining of a number of loans into a single new loan. Usually done to gain more favourable terms e.g. lower cost repayments or longer time to pay.
Principal - A sum of money owed as a debt, upon which interest is calculated. If you purchased an item for $100 on your credit card that would be principal balance.
Repossession - A creditor's taking of property that has been pledged as collateral for a loan.
Secured Debt - A debt on which a creditor has a lien. A car loan would be an example of secured debt.
Term - The time required to repay a loan.
Unsecured Debt - A debt that is not tied to any item of property. Credit card debt is an example of unsecured debt.
About the Author
1st Finance Guide features help and advice on debt consolidation amongst other general finance matters.
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