Wednesday, March 26, 2008

Frequently Used Debt Terms (Q-W)

Here is an organized list of debt terms you would find that are most commonly used in the industry.


Q-form: This form consists of a series of questions a borrower needs to answer during a loan requisition.

Quality Ratios: This means the amount of income spent towards housing and household debts. The front ratio is the first qualifying ratio which means the percentage of monthly payment that is spent towards a house payment. The back ratio consists
of all the monthly debts like credit cards, car payments, student loans divided by before-tax income in addition to the house payment .


Rate: When a lender grants a particular amount as loan to a borrower he also charges some amount as an interest rate either annually as Annual Percentage Rate (APR) or on a monthly basis. This is known as rate.

Real Financing Cost:
Real financing cost comprises of consumer rates related to varied expenditure and fees along with the time period of the loan. The complete real financing costs also include your closing fees in context of your loan amount.

Refinancing: The process of clearing off one loan with the help of a fresh loan by the same individual is known as refinancing.

Repossession: When a borrower fails to repay a particular loan amount, the creditor in most cases seizes the collateral to make up the particular loss which the present loan is worthy of.


Secured Debt: These types of debts are usually backed up by collateral in case the borrower fails to pay a loan within the given time. These loans are taken at times the borrower is undergoing a financial crunch. Auto loans, mortgages, are some important examples of secured debts.

Security: This is same as collateral which is given as a supportive materialistic assurance, (equivalent to the present loan amount) to creditor in case a borrower fails to repay a loan amount. The creditor in that case can sell of this additional property to retrieve his money.

Security deposit: This is an additional assurance for a lender, in case the borrower defaults while repaying the loan.

Servicing: A complete evaluation and updated transaction kept by a lender during the post loan period. This includes collection and payment of taxes, insurance, property estimations and similar type of dealings.

Simple Interest: The interest rate that is charged on the basic amount that is borrowed. This interest rate is not compounded and thus is considered to be the most lucrative.

Sign up fee:
When a customer gets registered with a particular company to avail the required services, the company might end up charging a certain amount of money from the customer. This is known as sign up fee. However, now most of the companies do not charge the customers anything as sign up fees.

Student cards: These are credit cards especially designed for the use of a student. These cards have a considerably low purchase limit on them and a lower interest rate for the benefit of the students. The students with a respectable credit history find these cards convenient for their limited use.


Tax Impound: Money paid to a lender in relation to annual tax expenditures.

Tax Lien: When a borrower fails to pay taxes at regular intervals the lender may claim a property of the borrower to make up the tax amount.

Third Party Fees: When a lender hires a third party and avails their services he pays a particular amount of money as fees to them.

Total Payments: The entire amount a borrower pays during the life span of a loan which includes principal amount, interest rates, taxes and other financial charges.

Trade Lines: The various credit accounts that reflect on your credit report are known as Trade lines.

Trans Union: It is amongst the three largest and most popular credit bureaus in the United States.

Trustee: A person (or institution) who has legal rights and responsibilities to a property and is entrusted to use it for another’s benefit.

Truth-in-Lending Act: This is a Federal law which consists of a written document with all the terms and conditions related to a particular mortgage transaction. This documentation includes mandatory disclosure of APR, hidden fees and other relevant charges.


Underwriting: Procedure dealing with the evaluation of a particular property as mentioned in the appraisal report. It also deals with the borrower?s creditworthiness and capacity and willingness to repay a particular loan.

Underwriting Fee: The underwriting fee includes the total cost pertaining to the evaluation and estimation of a loan, an individual?s credit report and its latest status in order to determine an his credit worthiness as an applicant for a loan.

Usury: The additional interest charges on the legal rates that are enforced by the law.

Unsecured Debt: A debt or loan which is not backed by collateral. Unsecured debts are usually a verbal commitment that has no security attached to it in case the borrower undergoes a default during repayment of a loan amount. Personal loans, credit card bills, medical bills are some typical examples of unsecured debts.


Verification of Deposit (VOD): A written document signed and approved by the original creditor or the financial institution from where the borrower had taken the loan. This document verifies and authenticates the status of a borrower?s financial records and transactions.

Voluntary Lien: A lender?s legal claim for a property with the approval of the owner which includes payments for a pending debt amount and the services used.


Waiver: A formal written statement of renouncing a claim or right or position etc.

Wraparound: It is a process through which an anticipatory loan is merged with a new loan the interest rate of which falls in between the old rate and the current market rate. The amount of loan is generally paid to the second lender who then forwards the same to the first lender and keeps the additional amount as fee.

Wire Transfer Fee: Occasionally funds can be transferred via the inter-bank wire transfer system to you, your original creditor, or to the collection agencies. There are minimum charges as fees for this type of transfer.

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