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Debt Glossary

APR-  Also known as annual percentage rate, APR describes the interest rate for the whole year, instead of just a monthly fee/rate.  

APY-  Also known as annual percentage yield, APY describes the annual rate of interest while also considering the effect of compounding (this is where interest has been added to the original payment thereby the added interest will also earn interest.) usually for deposit or investment products.

Assets-  Assets are items you own that have monetary value. Assets would include your property, car, stocks, shares, antiques and savings etc.
Bankruptcy-  A legally declared impairment or lack of ability of a person or company to pay it's creditors.

Billing Cycle-  The period of time between bills. Typically 30 days.

Billing Statement-  A statement listing the purchases, payments and other debits and credits made to the credit card account within the billing cycle.
Checking Account-  An account that can quickly provide frequent access to needed funds, through several different channels.  Such an account is called a checking account in North America.

Charge-off- Debt that has been determined uncollectible by the original creditor, usually after the debtor has become seriously delinquent.

Closing Date- The end of the billing cycle.

Collection Companies-  A company hired by a lender to recover funds that are past due or accounts that are in default.

Collateral-  Property or money that you promise as a security for a loan which is given up if you default on the loan.

Cosigner- Another person who signs for a loan and assumes equal liability for it.

Credit-  The giving of resources from one party to another, where the second party does not reimburse the original party immediately, but instead arranges to repay or return those resources at a later date.  It is any form of deferred payment.

Creditors- A person or company whom lends you money (usually a bank, building society or credit card company).

Credit Bureau- an agency that collects and maintains individual credit information.

Credit Card-  A card entitling its holder to buy goods and services based on the holder's promise to repay for those goods or services.

Credit Counseling-  A service offering education to consumers about how to avoid incurring debts that cannot be repaid.

Credit History- An individual history of previous credit accounts was maintained.

Credit Limit- This represents the maximum sum of money that a borrower may charge on a credit card and includes finance charges, cash advances, fees, and purchases. A consumer's credit history determines his or her credit limit.

Credit Repair-  The process you can take to improve your credit by 1) disputing or correcting discrepancies on your credit report, or 2) by paying off your debts.

Credit Report- a report maintained by a credit bureau detailing your credit history

Credit Worthiness- A creditor's measure of a consumer's past and future ability and willingness to repay debts.

Credit Score-  A numerical summary of the information contained in your credit report
Daily Rate- The daily rate is 1/365th of your annual percentage rate

Debit Card-  A plastic card that allows the holder to withdraw money or have the costs of purchases charged to the holder's bank account.

Debt-  An amount owed to another person or company.

Debt Consolidation-  Rather than paying off individual bills one takes out a loan with an institution consolidating their loans under one lower monthly payment extending over a period of time.

Debt-to-income ratio: the percentage of your income that goes toward paying your debt

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

Default-  When a debtor does not meet his or her legal obligations according to the debt contract, for example, not making a payment or violating a loan condition.

Default rate: The default rate is the highest interest rate charged by a creditor or lender

Delinquency- A debt or other financial obligation on which payment is overdue.

DMP (Debt Management Plan)-  A plan that will help the consumer repay the debts, and will help the creditors collect the money that is owed to them.
FICO- The version of your credit score developed by and named after the Fair Isaac Corporation that normally ranges from 300 to 850

Financial Charge- Total amount of interest and fees accumulated in given billing period.

Fixed Interests- Annual percentage rate that does not fluctuate throughout the term of a debt. This is subject to change if certain terms are not met.
Grace Period- Time frame following the due date on an account for the payment to be received without penalty.

Gross Income- Total income prior to any deductions.
Installment Rate- Debts that are repaid with a fixed number of payments of equal amount, like an auto loan.

Interest Rate-  A fee paid on borrowed money.  Typically this is a monthly or yearly charge that is a percentage of your total borrowed money.
Joint Account- An account opened with multiple users, each share the same responsibilities with the debt.
Late Fee-  A charge placed against a client by a company or organization for not paying their bill on time.  For example,, if you do not pay your credit card bill on time you will have to pay a fee on your late payment.

Liabilities- Responsibility for unpaid debts.
Minimum Payment- the minimum amount that must be paid to avoid defaulting

Mortgage-  The transfer of an interest in property to a lender as a security for a debt - usually a loan of money.
Net Income- Total income after all deductions have been made.
Overdraft- An overdraft occurs when withdrawals from a bank account exceed the available balance which gives the account a negative balance - a person can be said to have gone "overdrawn"

Over-the-limit fee- fee imposed for exceeding your credit limit.
Past Due Amount- Remaining amount of payment due from a previous billing cycle.

Past Due Fees- Fee assessed for having a past due payment amount during a billing cycle.

Payment History- Comprising 35% of the FICO or credit score, this variableprovides the following information about a consumer: 1) number of past due debts, 2) number of accounts paid, 3) outstanding balances on delinquent accounts, 4) duration of delinquency, and 5) public records such as wage garnishments, liens, lawsuits, judgments, and bankruptcy.

Principal- Initial amount owed on a loan or credit account.
Returned Check fee- the fee imposed by a creditor or lender when your payment check is returned.

Revolving Account- An account that maintains a balance each month.
Savings Account-  A bank account that accumulates interest over time.

Secured Debt-  Debt that, in the event of default, has first claim on specified assets.

Service Charge-  A fee for service.  For example,, using an ATM that is not part of your bank will charge you a service fee to use it.
Tax Rate- This represents the percentage of income that an individual or business paid as tax. Tax rates differ depending on the taxpayer's level of income.

Transaction Fee- Fees charged for any activity on an account.
Unsecured Debt-  A debt that is not guaranteed by collateral.
Variable Expenses- Expenses that are due each month but are not consistent in their amounts, like credit card bills, groceries, utility bills and gas.

Variable Interest Rate- an interest rate that moves up and down based on another interest rate