Debt Consolidation – A way of incorporating all your outstanding debts into one loan resulting in more affordable payments by avoiding high interest charges on credit card debt.
Debt Management – A way of reducing your repayments to your creditors over a number of years is called a DMP or Debt Management Plan. The payments are negotiated on your behalf between a debt management company and your creditor.
Fixed Rate – The interest rate is fixed for a certain period.
Flexible Loan – This is a loan with a credit limit that allows you to choose how much and when you would like to borrow as well as how much you would like to repay each month. The level of interest is calculated on the outstanding balance on a daily basis. The interest may be higher than a regular fixed loan but it can be reduced by making over payments.
Gross Income – This is your income before deductions such as tax have been made.
Guarantor - A person who agrees to guarantee the debts of another person is known as a guarantor. If for any reason the borrower cannot meet the repayments the guarantor is obliged to do so for them.
Hire Purchase – The purchaser pays a deposit prior to taking possession of the goods. The outstanding balance is paid by instalments over a specific period and once all have been paid the ownership passes to the purchaser.
Home Income Plan – This allows homeowner to release equity within their home without having to sell it. It can be done in two ways firstly by Annuity where a mortgage or re-mortgage is secured on the property then by which the proceeds are used to purchase an annuity to produce an income. Secondly by Reversion where the property is sold to an insurance company, the owner remains a resident and is paid an income and when he/she dies the life insurance company takes over the property.
Inflation - Inflation is the rise in the general level of prices of goods and services in an economy over a period of time.
Inheritance Tax – Inheritance tax is a tax payable on the estate of a deceased person. The total amount of tax that must be paid by the estate depends not only on the value of the estate at that time but also on any gifts given in the previous seven years. Inheritance tax is exempt between husband and wife, or to a charity.
Interest Rate – This is the percentage rate at which interest is charged on a loan or paid out on savings.
IVA - An Independent Voluntary Agreement is a formal agreement between you and your creditors where you will come to an arrangement with the people you owe money to, to make reduced payments towards the total amount of debt in order to pay off a percentage of what you owe. An IVA has to be set up by a licensed professional called an Insolvency Practitioner.
Liabilities - These are the debts of a person or company.
Life Assurance – Large liabilities such as a house mortgage can be protected if you have Life Assurance cover. The Life Assurance Company will pay out a lump sum if the policyholder dies.
Liquidation - This occurs when a company terminates as a result of not paying its debts or if it ceases trading.
Loan - A loan is when a person borrows money from a financial institution or other type of lender over a set period of time with an agreement to pay it back, usually on a monthly basis, with interest.