Our debt glossary - most finance terms explained

Arbitration
The definition of meeting with the actual creditor or collection agency. This is often done to try and come to an agreement without going to trial.

Balance
The definition of an amount owed to a creditor, or on an outstanding loan.

Bankruptcy
A legal status a consumer may file. This is when a consumer tries to start fresh and have the debts forgiven through the courts.

Bankruptcy (Chapter 13)
This is when a consumer files for bankruptcy, but with the intentions on setting up a repayment plan for partial payment of the debts owed.

Bankruptcy (Chapter 7)
This is when a consumer files for bankruptcy and most debts are forgiven. Courts may cease assets.

Budget
It's a broken down summary of the consumers income vs expense.

Credit counseling services
It's a debt relief program, often referred to as a debt management program whereby a consumer uses a non-profit third party to reduce minimum payments and interest rates. It does not hurt the consumers credit score.

Debt settlement
Its a debt relief program, which works to cut the debt usually in half. A payment plan is then created on the fractional balance.

Default
The definition of falling behind, missing a payment - going into default.

Interest
This is a numeric number charged by the creditor on the debt given for a set period of time.

Minimum payment
Just as it sounds, a minimum required due (often 2-3%) each month to satisfy that months payment.

Principal
The total amount owed or amount loaned from the creditor to the consumer.