The Center For Debt Management
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Glossary of
FinanciaI & Real Estate Terms

Index of Terms | Complete List of Terms

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Callable Debt : A debt security in which the issuer has the right to redeem the security at a specified price on or after a specified date, but prior to its stated final maturity date.

Cancellation of Debt : Occurs when a creditor forgives a debt. Cancellation of debt is taxable as income unless the creditor intended it as a gift or it meets certain exceptions relating to bankruptcy, insolvency, or farming.

Capital : Money and other property of a person, business corporation or other enterprise used in transacting the business.

Capital Account : An account of the net value of a business at a specified date.

Capital Asset : A long-term asset that is not purchased or sold in the normal course of business. Generally, it includes fixed assets, e.g., land, buildings, furniture, equipment, fixtures and furniture.

Capital Budget : The estimated amount planned to be expended for capital items in a given fiscal period. Capital items are fixed assets such as facilities and equipment, the cost of which is normally written off over a number of fiscal periods.

Capital Contribution : Cash or property acquired by a corporation from a shareholder without the receipt of additional stock.

Capital Expendure (CAPEX) : The amount used in business during a particular period to acquire or improve long-term assets such as property, plant or equipment.

Capital Funds : The total of capital debentures and capital stock, if any, surplus, undivided profits, unallocated reserves, guaranty fund, and guaranty fund surplus.

Capital Gain : The amount in excess of the selling price over the purchase price, which may be given special treatment for tax purposes provided the sale takes place more than a given number of months after purchase.

Capital Improvement : In general, it is any value added activity or cost to a long-term or permanent asset that increases its value. In real estate, it is any permanent structure or other asset added to a property that adds to its value.

Capital Loss : The amount in excess of the purchase price over the selling price when the assets have been held for more than a certain period of time and which is given a special treatment for tax purposes.

Capitaization : The statement of capital within the firm, either in the form of money, common stock, long-term debt, or in some combination of all three. It is possible to have too much capital (in which case the firm is overcapitalized) or too little capital (in which case the firm is undercapitalized).

Caps : A set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime. Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would mean that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each, and the lifetime cap is 6%. Two-Step loans are quoted with a single cap, which is the amount by which the loan may adjust at its single adjustment date.

Carryback Loan : A loan in which a seller agrees to finance a buyer in order to complete a property sale.

Cash Advance Loan : A loan where a borrower gets cash advanced based on his paycheck. These loans generally up are up $500 and must be repaid on the next payday.

Cash-Out Refinance : This is a transaction in which the borrower receives additional cash he can use for any purpose. Cash-out refinance happens when a borrower receives a greater amount of money in a fresh loan when compared to the money he uses to pay his debts.

Cash Available for Debt Service : Ratio of cash assets to debt service. It is used in evaluating the risk of a project or firm. The higher the ratio the less likely the firm or project will fail to meet its debt obligations.

Cash Flow : Earnings before depreciation and amortization. Cash flow is calculated as the difference between cash inflows and outflows. Cash flow can be derived from Operating Profit by adjusting for items which do not affect payments (e.g. depreciation) and items (e.g. changes in working capital) which affect payments but are not recorded in operating profit.

Certificate Of Deposit (CD) : A document written by a bank or other financial institution that is evidence of a deposit, with the issuer s promise to return the deposit plus earnings at a specified interest rate within a specified time period.

Certificate of Eligibility : A certificate which shows a veteran's evidence of entitlement for a VA guaranteed loan.

Certificate of Reasonable Value (CRV) : An appraisal that has been performed on a property that is being paid for a VA loan. After the property has been appraised, the Veterans Administration issues a CRV.

Chapter 7 : The chapter of the Bankruptcy Code that allows for liquidation  of all assets of the individual or company to clear debts. It is also known as straight bankruptcy.

Chapter 11 : This is a reorganization bankruptcy. It is filed by companies or partnerships. A debtor filing for bankruptcy under Chapter 11 generally proposes a reorganization plan to keep the business alive and make it profitable and pay creditors over a period of time.

Chapter 12 : The chapter of bankruptcy Code providing relief for debts of a family farmer .

Chargeback : Occurs when a credit card processor charges back  to the merchant the cost of returned items or incorrect orders that the customer claims were made to his or her credit card.

Claim : A creditors assertion of right to money from the debtor or debtor s property.

Clear Title : A title that is free of liens or any legal question as to the ownership of the property.

Closed-end Credit : Generally, any loan or credit sale agreement in which the amounts advanced, plus any finance charges, are expected to be repaid in full over a definite time. Most real estate and automobile loans are closed- end agreements.

Closed-End Lease : A lease in which you are not responsible for the difference if the actual value of the item at the scheduled end of the lease is less that the residual value, but you may be responsible for excess wear-and-use charges and for other lease requirements.

Closing : The meeting between the buyer, seller and lender. When the property and funds legally change hands there is a interaction or meeting between the buyer, seller, and the lender. This is known as closing or settlement.

Closing Costs : Fees that are paid by the borrower when a property is purchased or refinanced. Typical costs incurred include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. All closing costs are separated into "non-recurring," and "pre-paid." Non-recurring charges are any items that are paid only once because a loan was obtained or a property bought, such as a loan origination fee. Pre-paid charges are those that recur over time, like insurance and property taxes. These are summarized in the Good Faith Estimate.

Cloud : An outstanding claim or encumbrance, that, if valid, would affect or impair the owner's property title.

Collateral : This is a piece of property or asset, such as stocks, bonds or a car, offered to support a loan. This property can be seized or taken away legally if you fail or can be seized if you default.

Collection Agency : When a borrower is unable to pay off his debts within the allotted time period, the original creditor appoints a company to collect the debts on his behalf. This company is known as the Collection Agency. The Collection Agency gets a certain percentage from the original creditor as their fees.

Commitment : A written document or agreement between a lender and a borrower on a loan amount or any monetary transactions. This document is backed by certain terms and policies for a stipulated period of time.

Conforming Loan : A loan for up to and including $417,000 in the continental United States (Alaska and Hawaii limits are higher).

Construction Loan : A short term loan for funding the cost of constructing real property. The lender advances funds to the builder as the work progresses.

Consumer Credit Counseling Service : A service that offers counseling about how to work out a realistic budget and debt repayment plan and work with creditors. The goal is to ensure that debts are paid back over time.

Consumer Debt : Consumer credit which is outstanding. In macroeconomic terms, it is debt which is used to fund consumption rather than investment.

Conventional Mortgage : A mortgage loan that is obtained without having any additional guarantees for repayment, such as, FHA insurance, VA guarantees, or private insurance. This loan is usually given at an 80% loan-to-value ratio.

Conversion : The right of a borrower to convert an adjustable or balloon loan into a fixed loan.

Cosigner : The cosigner is the third person other than the borrower and lender, who is a witness to the loan. He signs on doted lines and is equally responsible for your loan.

Credit : A particular sum of money granted by a creditor with the provisions for the borrower to pay in the future. It also means an amount of money an individual owes to a person or business.

Credit Bureau : An agency that maintains the records of your credit record and issues it to you when required.

Credit Card : Also known as plastic money, this is a card used to borrow money or buy goods for personal use.

Credit Card Debt : Unsecured consumer debt, accessed through the use of credit cards. Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.

Credit File : A file held by authorised companies with financial history regarding credit applications and credit you have borrowed.

Credit History : The overall financial record of the monetary transactions you dealt with. It shows the amount of money you borrowed, the amount you repaid and the sum which you still need to pay back.

Credit Insurance : Health, life, accident, or dispurtion of income insurance designed to pay the outstanding balance of debt.

Credit Limit : The maximum amount of money you may charge to a particular account. For example, if your credit limit on a credit card is $10,000, you total transaction cannot exceed $10,000.

Credit Line : The maximum amount of money available in an open-end credit arrangement such as a credit card, or overdraft protection.

Credit Loan : A mortgage that is issued on only the financial strength of a borrower, without any regard for collateral.

Credit-Loss Ratio : The ratio of credit-related losses to the dollar amount of MBS outstanding and total mortgages owned by the corporation.

Credit Rating : Assesses the credit worthiness of an individual. Credit ratings are calculated from financial history and current assets and liabilities. Typically, a credit rating tells a lender the probability of the subject being able to pay back a loan. A poor credit rating indicates a high risk of defaulting on a loan, and thus leads to high interest rates.

Credit Ratio : The percentage calculated based on a debtor's monthly payable installment amount divided by his net earnings, is known as the credit ratio.

Credit-Related Expenses : The sum of foreclosed property expenses plus the provision for losses.

Credit-Related Losses : The sum of foreclosed property expenses plus charge-offs.

Credit Report : The credit report is a financial document which consists of a person's credit history and also reflects his updated financial position. A credit report determines an individual's credit worthiness. An individual can acquire his credit reports from credit bureaus.

Credit Reporting Company : These are companies that compile reports on an individual's credit history from multiple credit repositories and merge them into a wholesome credit report.

Credit Repository : Companies that gather financial information on an individual's credit history and gives the updated feedback to credit reporting companies.

Credit Score : A number, roughly between 300 and 800, that reflects the credit history detailed by a person's credit report. Lenders calculate this number with the assistance of computer systems as part of the process of assigning rates and terms to the loans they make.

Credit Scoring System : This is a highly statistical process used to grade individuals who have applied for credit, based on the various characteristics applicable to creditworthiness.

Credit Warranty : This is a written guarantee or commitment about the creditworthiness of the borrower given by the seller of the loan. The seller guarantees that the main intention of the borrower is to repay the loan under any condition and that he has got a good reputation in handling credit.

Creditor : A person or a financial house who lends money or you owe money.

Credit-related Insurance : This can be insurance related to health, life, or accident designed to repay the outstanding balance of debt.

Creditworthiness : Relates to past credit records and future ability to repay debts based on your current financial position.

Consumer : A person who purchases material goods for his personal use.

Consumer Credit Counseling Service (CCCS) : Organizations which help consumers find a way to repay debts through careful budgeting and management of funds. These are usually nonprofit organizations, funded by creditors. By requesting that creditors accept a longer payoff period, the counseling services can often design a successful repayment plan.

Consumer Debts : Debts incurred for personal reasons and not corporate requirements.

Credit Repair Companies : The credit clinics can be in the form of any individual or company which helps debt sick people to recover from their financial crisis and take care to clean up their bad debts.

Credit Grantor : Person or any business house supplying consumer goods in credit system.

Credit Reference : Information, the name of an individual, or the name of an organization that can provide details about an individual's past track record with credit. Credit rating agencies typically fill this role in the case of consumer credit; potential lenders consult the credit rating agency for information on an applicant as part of their process for deciding whether or not to grant credit to the applicant.

Credit Risk : The risk of loss due to a debtor's non-payment of a loan or other line of credit (either the principal or interest, or both).

Credit Type : This is a reference to the type of credit you are undergoing. This type of credit is highly related to your credit history. If you are regular and a punctual in your payments, you are supposed to have a ?good' credit type.

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Index of Terms | Complete List of Terms

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