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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Debit Card (EFT Card) : A plastic card which consumers may use to make purchases, cash withdrawals, or other types of electronic fund transfers. But with a debit card a person may not take any credit through purchase or cash withdrawal.

Debt : Amount of money owing to a company or person.

Debt-Asset Ratio : The ratio of a company's liabilities to its total assets. Long-term debt-assets is the ratio of long-term liabilities (those that won't be paid off in one year) to total assets.

Debt-Based Asset : An investment in the debt of another party. Savings accounts, bonds, annuities, and certificates of deposit are all debt-based assets because they represent debt of the issuer. Debt-based assets are generally conservative investments that pay a fairly predictable rate of return.

Debt-Equity Ratio : Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long-term debt by common stockholder equity.

Debt-Equity Swap : A refinancing deal in which a debt holder gets an equity position in exchange for cancellation of the debt.

Debt-to-Available-Credit Ratio : The amount of money a person has in outstanding debt, compared to the amount of credit available on all of the individual''s credit cards and credit lines. The higher a person''s debt to available credit, the more risky the individual appears to potential lenders.

Debt-to-Equity Ratio : Total liabilities divided by the owner's total equity stake.

Debt-to-Income Ratio (DTI) : It is the proportion of debt you owe in relation to your income. It is calculated on the basis of debt divided by income.

Debt-to-Worth Ratio : Ratio that measures the financial leverage of a company. This ratio is defined as total liabilities divided by net worth. Low debt-to-worth ratio spells minimal risk for both the lender and business owner.

Debt Adjustment : An arrangement made for the repayment or satisfaction of debts in an amount or manner that differs from the original agreement.

Debt Bondage : A means of paying off loans with direct labor instead of currency or goods. It is either a kind of indenture or truck system, and is a form of unfree labor.

Debt Capacity : The ability to borrow. The amount a person or firm can borrow up to the point where the firm s value no longer increases.

Debt Capital : The capital that a business raises by taking out a loan. It is a loan made to a company that is normally repaid at some future date. Debt capital differs from equity or share capital because subscribers to debt capital do not become part owners of the business, but are merely creditors, and the suppliers of debt capital usually receive a contractually fixed annual percentage return on their loan, and this is known as the coupon rate.

Debt Ceiling : The maximum borrowing power of a person, business or governmental entity.

Debt Collection Agency : A business that pursues payments on debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed. Some agencies, sometimes referred to as "debt buyers", also purchase debts from creditors for a fraction of the value of the debt and pursue the debtor for the full balance. Creditors typically send debts to a collection agency in order to remove them from their accounts receivable records; the difference between the amount collected and the full value of the debt is then written off as a loss.

Debt Collector : A person employed by a creditor or debt collection agency who s purpose is to collect on a debt.

Debt Compliance : Describes various legal measures taken to ensure that creditors, whether individuals, businesses, or governments, honor their debts and make an honest effort to repay them. Generally regarded as a subdivision of tax law, debt compliance is most often enforced through a combination of audits and legal restrictions.

Debt Consolidation : This is a process where your multiple debts are consolidated into one loan amount. Debt consolidation saves you from the harassment of the creditors and also gives you the leverage of repaying your debts in affordable monthly installment. In a debt consolidation program a major percent of your debt amount is eliminated. All the late fees and hidden taxes are also eliminated. Usually one can pay off their debts within a reasonable period of time with the help of such programs. However the time period to clear a particular debt depends on the type and amount of debt a person is undergoing.

Debt Counselor : A professional person who provides advice on repaying or eliminating debt.

Debt Financing: : When a business raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay principal and interest on the debt.

Debt Forgivenes : The partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations.

Debt Leverage : Use of debt to increase investment. Used by a company to increase the overall amount invested, thus hopefully also increasing returns to shareholders.

Debt Limit : The maximum borrowing power of a person, business or other entity.

Debt Management Plan : A Debt Management Plan (DMP) is an informal debt repayment arrangement between a debtor and their creditors.

Debt Ratio : The proportion of a busines s total assets that are being financed with borrowed funds. The debt ratio is calculated by dividing total long-term and short-term liabilities by total assets. Assets and liabilities are found on a company's balance sheet.

Debt Relief : An arrangement intended to reduce the burden of debt, including forgiveness of part or all of what is owed to creditors.

Debt Retirement : The complete repayment of debt.

Debt Security : Security that represents the money a company borrows such as a note, bond, commercial paper or bill.

Debt Service : Total payments due on loans (repayments plus interest).

Debtor : A debtor is someone who is in debt and is required to repay their creditors.

Debtor in Possession : A company that continues to operate under the Chapter 11 bankruptcy process.

Debtor Nation : A country whose assets owned abroad are worth less than the assets within the country that are owned by foreigners.

Deed : A legal document which is a documentation and proof of a particular property, when it is transferred from one owner to another. The deed basically contains a description of the concerned property, the signatures of both the parties and witnesses and is handed over to the buyer at closing.

Deed of Trust : A legal document that conveys title to real property to a third party. The third party holds title until the owner of the property has repaid the debt in full.

Default : If the debtor fails to meet the commitments in legal obligations which are mentioned in the contract, it is known as default.

Default Notice : A notice issued by a creditor when a financial agreement that was been made between you and your creditor fails because the arrangement has not been kept. A default notice is the lender informing you that they are intending to take step to recover the money you owe them.

Deferred Interest : Deferred Interest or Negative Amortization takes place when your monthly repayment towards a loan is not enough to meet the interests due on the loan, and eventually gets added to the original balance of the loan. This is dangerous because the borrower at the ends is obligated to pay a greater amount than he actually borrowed.

Deficit : If your income is less than your expenditure i.e. you are spending more than you are bringing in, this is a deficit. Reducing your outgoings or increasing your income can assist in a financial deficit.

Delinquency : When you fail to abide by the loan agreement and miss out on making payments within the time period, delinquency takes place.

Dependent : People who rely on others for their living requirements and have no income of their own, for example children and homemakers.

Deposit : A lump sum given in advance as security. A deposit is always paid of a larger amount to be paid in the future. In mortgage and real estate terms, this is called the "earnest money deposit."

Depreciation : In real estate and mortgage terms, the decline in the property value.

Disclosures : Information conveyed to a consumer in context to his financial transactions is known as a disclosure.

Discharge : A release issued by the court relieving the debtor from personal liability of all dischargeable debts. Not to be confused with a "charge off" or "write off" which is an accounting term which does not erase debts.

Dischargeable : Debt: A debt from which the debtor can be released based on the Bankruptcy Code.

Discount : An amount deducted from the regular price for those who purchase with cash instead of credit.

Discount Points : It is a percentage of the mortgage loan which is paid to the lender by the borrower in order to lower the interest rate on the loan. Generally one point equals one percent.

Document Preparation Fee : Such fees are given to companies who are appointed to prepare the loan closing documents.

Down Payment : Money that is paid to a seller by a buyer from his own funds, as opposed to that portion of the purchase price which is financed.

Due-on-Sale Clause : The provision or leverage enjoyed by a lender in a mortgage or deed of trust, where he can claim immediate balance of the loan upon sale of the property.

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Index of Terms | Complete List of Terms

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