an individual, sole trader or partnership is formally declared
bankrupt by the court (ie they cannot pay their debts) and that
the debts and assets of a person should transfer to an
appointed trustee.
Company bankruptcy;
companies can also fail and if this happens, the company is
said to be insolvent. It may be made subject to liquidation,
receivership or an administration order issued by the courts
Beneficial Loan
A loan made by an employer
to an employee on which interest is either not charged or is
less than the official rate. The difference between the
interest charged and the official rate is taxable.
Beneficiary
The Person who is entitled to
receive funds of property under the terms and provisions of a
will, trust, insurance policy or security instrument. In
connection with a mortgage loan the beneficiary is the lender.
Benefits
Benefits are paid to you by the state and include income
support, child benefit, job seeker's allowance, disability
benefit, housing benefit, and council tax benefit.
Binding
For example, an agreement, which is
binding cannot be legally avoided or stopped.
Budget
A list of all your income and
expenditure is a budget.
Budget deficit
A deficit is the gap between
spending and revenue and thus the amount that may need to be
borrowed.
Building Society
'Mutual'
non-profit-making institutions set up to lend money to their
members for house purchase. Building societies are 'mutual;'
because they are owned by their members, and their members are
entitled to their profits and benefits.
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DEBT GLOSSARY - C
Cap rate
The discount rate used to
determine the present value of a stream of future earnings.
Typically this will be an appropriate risk-free return plus a
premium to reflect the risk of that specific investment.
Citizens advice bureau
An office
represented in most towns in the UK, where the public can
obtain free advice on an extensive range of civil matters
including social security, consumer matters such as loans and
rental arrears, employment, housing matters such as mortgage
and rent arrears, legal matters such as legal aid, family
matters, taxation and many other subjects.
Classified Property Tax
Property tax which
varies in rate depending on the use of the property
Credit is an agreement in which a borrower receives
something of value now and agrees to repay the lender later.
Creditor
A creditor is an individual or a
company that is owed money by another person.
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DEBT GLOSSARY - D
DAS administrator
The Accountant in
Bankruptcy is the DAS administrator. They are responsible for
maintaining the DAS Register which contains details of debt
payment programs (DPPs), and for the approval of money
advisers, payments distributors and debt payment programs
(DPPs).
Debt
Means any money that is owed or due to someone else.
Debt Capital
Debt Capital is the capital
raised through the issuance of bonds.
Debt consolidation
Debt consolidation is
the replacement of multiple loans with a single loan, often
with a lower monthly payment and a longer repayment period. It
can also be called a consolidation loan.
Debt-equity swap
Debt equity swap is a transaction in which existing bonds
(debt) are exchanged for newly issued stock (equity). For
example, an individual can in essence cancel a portion of their
debt and transfer the equivalent balance to equity. A
debt-equity swap can help an individual that is in financial
trouble by cancelling some of their outstanding debt. Debt
management A form of dealing with debt where the debtor can pay
their debts (including interest and penalty charges) in full -
they just need a bit more time. The debtor will keep control of
their assets and most importantly they will keep their home.
Debt payment program (DPP)
An
agreement under the Debt Arrangement Scheme (DAS) that allows
you to pay off your debts over an extended period of time. The
program can be for any amount of money or for any reasonable
length of time.
Debt relief
The last resort for a debtor
when dealing with debt where the debtor cannot pay their debts
- bankruptcy. The debtor will lose control of their assets,
possibly including their home and their credit rating will be
greatly affected. Debtor
A debtor is an individual or sole trader who owes money
to another person or company (creditor).
Deduction
An
expense subtracted from adjusted gross income when calculating
taxable income, such as for state and local taxes paid,
charitable gifts, and certain types of interest payments.
Default notice. This is a letter
reminding a debtor that they haven't paid their debt. This must
be issued by a creditor in respect of debts covered by the
Consumer Credit Act 1974 before any further action is taken.
Demand
The lender's statement of the amount
due to pay of a loan. We all rely on
people keeping their promises. If a promise is not kept the
courts may order someone to pay what they are due.
There are a number of ways that people can be made to pay after
a court order has been made. The most common forms of court
enforcement, or diligence, are arrestment , earnings arrestment
and attachment. There are other less common ways to enforce
court orders. They include inhibition and adjudication, and
your lawyer or adviser can tell you more about them if needed.
Direct debit
An instruction you give to
your bank or building society to make regular payments from
your account to a specific company. Unlike a standing order you
agree that the creditor can vary this amount each month.
Disclaimer
A statement made to free oneself
from responsibility.
Discounted loan
A loan on which the interest and financing
charges are deducted from the face amount when the loan is
issued.
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DEBT GLOSSARY - E
Earnings
Revenues minus expenses and taxes.
Also called income.
Earnings arrestment
If you are working, the
money you owe to a creditor can be taken from your wages/salary
directly from your employer by an earnings arrestment.
Endowment
A permanent fund bestowed upon an
individual or institution, such as a university, museum,
hospital, or foundation, to be used for a specific purpose.
Entitlement
Benefits guaranteed to an
individual, such as dividends for shareholders or government
aid for those who qualify.
Equity
The value of a person's interest in
real property after all liens and charges have been deducted.
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DEBT GLOSSARY - F
Fee
A charge for services rendered
Final Salary
The basis of determining a
person's pension entitlement in a final salary scheme and which
normally refers to an occupational pension
Finance
Finance deals with matters related
to money and the markets.
Flexible Mortgage account
A combined
mortgage and current account. Any savings each month earn the
mortgage rate, which is a relatively high and tax-free rate of
return.
Frozen account
A bank account whose funds
may not be withdrawn until a lien is satisfied or an ownership
dispute is resolved.
Funds
A pool of money normally set apart
for a purpose, for example, a pension fund to provide pensions.
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DEBT GLOSSARY - G
Grace period
The period, normally 30
days, during which an insurance policy remains in force even
though the premium has not been paid.
Grant
Funding for a non-profit
organization, usually for a specific project.
Gross Income
The scheduled (total) income,
either actual or estimated, of a person before deductions. This
for example could be a person's salary plus bonuses, plus
benefits in kind (e.g. company car and medical insurance) plus
income from shares etc.
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DEBT GLOSSARY - H
Hire purchase (HP)
The pre-agreed purchase
of an asset where the asset e.g. computer is in your possession
as long as repayments are kept to. Once enough payments are
made, the asset becomes your property.
Holder
A person in possession of a
negotiable instrument such as a bill of exchange or promissory
note. That person may be the payee or the endorsee.
Or a person who has made an opening purchase of an option and
thus has acquired the rights to them.
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DEBT GLOSSARY - I
Incapacity benefit
A state benefit payable
after the expiry of state sickness benefit if a person is still
unfit to work. This replaces the former invalidity benefit and
as such carries a reduced level of benefit.
Money received by an individual as a salary, or from
investments. Cash deposits and bonds will provide income in the
form of interest. This income is subject to income tax.
Income from property Income
received from property letting is subject to income tax. The
amount taxable is the amount receivable in the tax year. If an
owner, occupier or tenant rents out a room he may receive up to
a certain annual income without incurring a tax liability.
Income tax
In most countries income tax is
progressive on successive slices of income, so that the more
you earn the higher the incremental rates of tax you pay.
In
the UK, everyone is allowed to make a certain amount of income
before any tax is payable. Known as the 'personal allowance',
the amount increases with age, and for the year 2005-2006 the
figures are:
- Under 65: £4,895
- 65-74: £7,090
- 75 and over: £7,220
If your income in a tax year is below these thresholds, you are
not liable for income tax. In some circumstances, where tax has
been deducted at source, you will be able to reclaim tax
already paid.
For earnings above your personal allowance,
your income tax liability will go up in bands and vary
according to whether the income is from employment, share
dividends or interest. The lowest rate is 10% and the highest
is 40%.Inflation The overall general upward price movement of
goods and services in an economy. Over time, as the cost of
goods and services increase, the value of the pound is going to
fall because a person won't be able to purchase as much with
that pound as he/she previously could.
Inland Revenue
The government department
responsible to the Treasury for the collection of direct taxes
which include income tax, capital gains tax and inheritance tax
etc.
Insolvent
Unable to meet debt obligations.
The regular periodic
payment that a borrower agrees to make to a lender.
Insured Mortgage
A mortgage insured against
loss to the mortgagee in the event of default and a failure of
the mortgaged property to satisfy the balance owing plus costs
of foreclosure.
Interest
The fee charged by a lender to a
borrower for the use of borrowed money, usually expressed as an
annual percentage of the principal; the rate is dependent upon
the time value of money, the credit risk of the borrower, and
the inflation rate. Here, interest per year divided by
principal amount, expressed as a percentage. also called
interest rate.
Interest Cap
The maximum interest rate
increase of an Adjustable Mortgage Loan. For example: a 120%
loan with a 5% interest rate cap would have maximum interest
for the life of the loan which would not exceed 17%.
Interest Rate
The percentage rate at which
interest is charged on a loan or paid on savings etc.
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DEBT GLOSSARY - J
Joint
Pertaining to multiple parties on the
same side of an agreement or transaction.
Joint account
Typically a bank or brokerage
account in the names of two (or more) people. Arrangements can
be made such that either individual or all signatures are
required when drawing checks/cheques.
Joint liability
The legal liability of two
or more people for claims against or debts incurred by them
jointly. If three people have joint liability and are indebted
to another party, they may only be sued as a group and not
individually.
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DEBT GLOSSARY - L
Late charge
A charge imposed by a lender to
a borrower when the borrower fails to make payment on the due
date.
Laundering money
The manipulation of money obtained in a wrongful manner, for
example theft, so as to seem to have originated from a lawful
source. An example is to pay the unlawful money into an
overseas bank and subsequently transfer back to the country of
origin.
Lease
A contract in which the legal owner
of property or other asset agrees to another person using that
property or asset in return for a regular specified payment
(known as rent) over a set term. In addition to buildings,
other items such as cars and computers are often leased in
order to avoid capital costs in the running of a business.
Legacy
Another term for bequest, that is,
the making of a gift by will. In the main there are three main
types of legacy.
- Pecuniary legacy: A gift of a fixed sum of money left
for example to an individual or a charity.
- Specific legacy: A gift of a specific item (such as a
set of books) left for example to a friend.
- Residuary legacy: A gift consisting of the residue of
an estate after all other conditions of the will have been
met, or part of such residue.
Lender
A person or company that offers to lend money to a borrower for
a given period of time. The borrower is obliged to repay the
loan either by instalments or single payment together with
specified interest.
Liability
The debts of a person or company
Liability Insurance
Insurance against legal
liability to pay compensation and court costs where the insured
has been found negligent in respect of injuries sustained by
another person or damage to his/her property.
Life assurance
An insurance policy which,
in return for the payment of regular premiums, pays a lump sum
on the death of the insured. In the case of policies limited to
investments which have a cash value, in addition to life cover,
a savings element provides benefits which are payable before
death. In the UK endowment assurance provides life cover or a
maturity value after a specified term, whichever is the sooner.
Liquid Assets
Cash plus assets which can
readily be converted into cash.
Liquidated Damages
A definite amount of
damages, set forth in a contract, to be paid by the party
breaching the contract. A pre-determined estimate of actual
damages from a breach.
Loan
An advance of money from a lender to a
borrower over a period of time. The borrower is obliged to
repay the loan either at intervals during or at the end of the
loan period together with interest.
Loan Account
An account, opened for a
customer by a bank, following the granting of a loan. The
amount of the loan is credited to the customer's current
account and similarly debited to the loan account. An
arrangement is subsequently made for the customer to repay the
loan, usually over a stated period of time, with interest
additionally being paid on the outstanding amount.
Loan Policy
A title insurance policy
insuring a mortgagee, or beneficiary under a deed of trust,
against loss caused by invalid title in the borrower, or loss
caused by invalid title in the borrower, or loss of priority of
the mortgage or deed of trust.
Loan ratio
The ratio, expressed as a
percentage, of the amount of a loan to the value or selling
price of real property. Usually, the higher the percentage, the
greater the interest charged. Maximum percentages for banks,
savings and loans, or government insured loans, is set by
statute.
Loan Sharking
Charging an
illegally high interest rate on a loan.
Lower earnings limit
The level of income at
which employees start to pay Class 1 National Insurance
contributions.
Lump Sum
A sum of money paid in a single
instalment.
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DEBT GLOSSARY - M
Maximizing income
Increasing the amount of
income you earn.
Money adviser
Someone who is trained to
offer advice both on debt and on increasing your income. A
money adviser can help you work out what your options are and,
where needed, negotiate affordable payments and set up
repayment plans with your creditors.
Money Broker
A type of agent who arranges
short term loans between banks (which are seeking to lend
money) and borrowers such as institutions. The money broker is
not involved in the process of lending/borrowing but merely
acts as an intermediary earning a commission.
Mortgage
A loan in which the borrower (the
mortgagor) offers a property and land as security to the lender
(the mortgagee) until the loan is repaid. Repayments of the
loan are usually made on a monthly basis over a long period of
time, typically 25 years. In the UK, the most common forms of
mortgage are the repayment mortgage and the interest only
mortgage.
Mortgage Broker
A person or company engaged
in the arrangement of mortgages for buyers. The broker is
usually paid a commission by the lender.
Mortgage Protection
Term assurance to cover
the repayment of a mortgage in the event of the death of the
mortgagor during the period of the loan.
In the case of a repayment mortgage the capital sum
outstanding is gradually reduced over the term of the loan
(albeit slowly during the initial years when the majority of
the repayments are paying the interest) so that decreasing term
assurance would be incorporated in the policy. For an endowment
mortgage where the sum assured and the death benefit are at
least equal to the amount of the loan throughout the term of
the loan, level term assurance would be apt.
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DEBT GLOSSARY - N
National Debt
The total debt accumulated by
a government through the issue of government bonds, Treasury
bills and Treasury notes. The government has to pay interest on
its borrowings, and this obligation is one of the major budget
items for many governments.
National Insurance
A form of taxation,
payable by employees, employers and the self employed, which is
notionally to fund state benefits including pensions, sickness,
unemployment and maternity. It is part of the state's social
security system and ultimately controlled by the Department of
Social Security.
Negative equity
A situation where the
purchaser of a property has taken out a mortgage and some time
after the purchase, the value of the property falls below the
mortgage amount.
Negotiable
The ability to be sold or
transferred to another party as a form of payment. Something
which is negotiable is transferable by endorsement and
delivery. A negotiable instrument could be a check made out to
you, because you could endorse it for payment to you or
transfer it to someone else as payment to them.
Net/after deductions
An amount of money
e.g. income you take home after income tax, national insurance
contributions, payments towards a pension scheme or any other
deductions have been deducted, usually by your employer when
you get paid.
Net assets
Total assets minus total
liabilities of an individual or company.
Net Income Net profit attributable to
ordinary shareholders after the deduction of all other charges.
Nominee
The person, bank or brokerage in
whose name securities are transferred.
Notarization
The certification by a Notary
Public that a person signing a document has been properly
identified. Notarization does not certify the content of a
document, only validity of signature.
Notary Public
A person authorized to
notarize certain documents.
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DEBT GLOSSARY - O
Ombudsman
Ombudsmen do not have any formal
power to reverse decisions but they have substantial moral
authority over companies or national or local government
agencies.
Within financial services, there are different
Ombudsmen for banking, building societies, insurance, pensions,
and investments.
If you have a complaint about your
treatment by a financial services company, the first thing you
should do is make the complaint directly to the compliance
officer or senior management of the company. If the outcome is
unsatisfactory, you can then take it to the Ombudsman who will
investigate and consider all the facts of the case, and make a
recommendation. The company will not always follow the
Ombudsman's recommendation, but usually will.
Open end mortgage
A mortgage permitting the
mortgagor to borrow additional money under the same mortgage,
with certain conditions, usually as to the assets of the
mortgage.
Ownership
Rights to the use, enjoyment, and
alienation of property, to the exclusion of others. Concerning
real property, absolute rights are rare, being restricted by
zoning laws, restrictions, liens, etc.
Open interest
The net amount of outstanding
open positions, either long or short, in a given futures or
options contract.
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DEBT GLOSSARY - P
Pass book
A book of recorded transactions
in a savings account, issued by banks and building societies in
the UK in which a customer's deposits, withdrawals and interest
are entered. The book is retained by the customer to give an
indication of the running balance.
Partial Release
Partial Release is a
mortgage provision allowing some of the pledged collateral to
be released if certain requirements are met.
PAYE (Pay as your earn)
People who earn
income from employment or who receive a pension are liable for
income tax under the PAYE system.
Taxable pay(gross salary
less pension contributions less allowances) is used by the
employer to calculate a person's income tax (according to
his/her notice of coding) which is passed to the Inland Revenue
usually monthly or weekly. This ensures that employees pay
their income tax on a regular basis.
Payment Cap
A Payment Cap is the maximum
amount for a payment under an Adjustable Mortgage Loan,
regardless of the increase in the interest rate. If the payment
is less than the interest alone, negative amortization is
created.
Pension Mortgage
A personal mortgage is a
type of personal pension plan which utilises the tax free lump
sum entitlement from the pension fund at retirement age to
repay a mortgage whilst the remainder is used to provide a
pension. Throughout the mortgage term the borrower pays
interest to the lender such as a building society or bank
whilst additionally making payments into the pension scheme.
Tax relief is allowable on both the interest payments to the
lender and on the contributions to the pension scheme which
makes this type of plan attractive.
Personal allowance
Tax allowances are
concessions by the Inland Revenue which can be used to reduce a
person's Taxable Income. The main allowance for UK taxpayers is
the 'personal allowance'; which is an amount of income that is
tax free. In the tax year 2005-2006 the personal allowances
are:
- Under 65: £4,895
- 65-74: £7,090
- 75+: £7,220
The personal allowances for elderly people are reduced if their
total income exceeds £19,500, and the amount of the reduction
if £1 for every £2 of the excess. So someone aged 68 with a
Total Income of £19,800 would get a personal allowance of
£7,090 less £300 = £6,790.
Personal Equity plan
A plan where people
over the age of 18 could formerly invest in the shares of UK
and other EC companies via an approved plan manager or through
qualifying unit trusts and investment trusts and receive both
income and capital gains free of tax.
Personal Income
Personal income is a
person's total income which includes salary, transfer payments,
dividend and interest income.
Personal Loan
Loans available from banks
and other financial institutions to private individuals for
personal use such as the purchase of a motor vehicle, holiday
or similar item are personal loans. Repayment periods vary from
one year to five years. No collateral is asked for or given for
the loan.
Personal possessions
The personal
possessions of a deceased person which pass to the beneficiary
or beneficiaries of the residue of estate unless otherwise
stated in the will.
Postal Account
In the UK, a personal account is a building society account in
which all transactions are conducted via post. In some cases a
pass book is used to record deposits and withdrawals although
societies are increasingly acknowledging each of their
customer's transactions with a single statement sheet which
depicts the amount deposited or withdrawn and the resulting
account balance
Pound cost average
In the UK, the regular
investing of fixed amounts over regular periods, typically
monthly, in order to accumulate holdings in securities such as
shares, unit trusts and investment trusts.
When for example
a unit trust price or investment trust price has fallen more
units or shares can be purchased for that month. Similarly when
the price rises then fewer units or shares can be purchased.
Over a period of a few years, the average price paid will be
lower than the average share price for that period since more
shares are bought at the lower price and fewer at the higher
price.
Power of attorney
A document which authorises a person to act on behalf of
another is a power of attorney.
Privatization
The sale of government-owned
equity in nationalised industries or other commercial
enterprises to private investors is the act of privatization.
Property Tax
Local tax assessed on property
owned, such as real estate or automobiles.
Public Sector Net Cash Requirement
Formerly known as Public Sector Borrowing Requirement (PSBR),
PSNCR is the difference between the expenditure of the public
sector and its income.
Where there is a deficit it is
financed by borrowing - principally via the sale of government
gilt edged stocks (gilts).
Public sector net borrowing also
measures the difference between the expenditure and income of
the public sector but differs from the net cash requirement in
that it is measured on an accruals basis whereas the net cash
requirement is mainly a cash measure.
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DEBT GLOSSARY - Q
Quick assets
Cash and other assets which
can or will be converted into cash fairly soon, such as
accounts receivable and marketable securities; or equivalently,
current assets minus inventory.
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DEBT GLOSSARY - R
Real Asset
An asset that is valuable
because of its utility, such as real estate or physical
equipment.
Receiver
A person appointed by a court to
finalize the affairs of a company and to utilise assets to pay
its creditors
Re mortgage
To re mortgage is arranging
alternative finance for the purchase of a property which is
already mortgaged.
Repayment Mortgages
A mortgage where
throughout the term, regular payments are made to partly repay
interest on the capital and to partly repay the capital itself
(the amount of the loan).
Initially the largest proportion
of the repayments will be used to pay interest since the
capital amount outstanding is at its highest value. Therefore
over the initial years the capital will not reduce very much.
However as the years proceed more and more of the monthly
repayments will be applied to reducing the capital until
towards the end of the term the large proportion will be paying
off capital and a small proportion paying interest.
Revenue Account
An investment trust term
referring to analysis of investment income.
Reverse Mortgage
An arrangement in which a homeowner borrows against the equity
in his/her home and receives regular monthly tax-free payments
from the lender.
Roll over mortgage
Mortgage for which the
unpaid balance is refinanced every few years at then-current
rates is a roll over mortgage. This is good for the borrower
and bad for the lender if interest rates are falling, and bad
for the borrower and good for the lender if interest rates are
rising.
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DEBT GLOSSARY - S
Salary
Wages received on a regular basis,
usually weekly or monthly. Sometimes the term is used to
include other benefits, including insurance and a retirement
plan.
Savings account
An account with a bank or financial institution which pays
interest on balances held, usually once or twice per year, the
amount of interest paid usually depends on to the amount of
money in the account and the 'base rate' of the Bank of
England. There is often a notice period required for
withdrawals and in most cases the longer the notice period, the
higher the interest rate.
Second Mortgage
A second mortgage is taking
out a mortgage on a property which is already mortgaged. This
can be used to raise capital if the property has significantly
increased in value and would involve finance companies rather
than banks or building societies. Since the first mortgagee
(lender) usually holds the deeds of the property, the second
mortgagee will carry a higher risk and thus charges a
considerably higher rate of interest.
Secured Bond A bond which is secured
by the guarantee of assets or collateral is a secured bond.
Secured loan
A loan which is backed up by
assets belonging to the borrower (normally property) in order
to decrease the risk taken on by the lender. Mortgages and some
personal loans are secured loans. If you don't maintain your
repayments, your property can be at risk of repossession.
Self assessment
From April 1996 all
taxpayers in the UK are obliged by law to maintain records of
their income and all types and capital gains so as to enable
annual tax returns to be completed. This is known as Self
Assessment. In April each year the Inland Revenue sends out
almost nine million self assessment forms to
taxpayers. Sequestration
the Scottish legal term for personal
bankruptcy is sequestration. This is where an individual, sole
trader or partnership is formally declared bankrupt by the
court (ie they cannot pay their debts) and that the debts and
assets of a person should transfer to an appointed trustee.
Sole trader
An individual proprietor of the
simplest form of business, e.g. a shop owned and run by a
single person.
Standing order
An instruction you give to
your bank or building society to make regular payments from
your account to a specific company. This is a fixed amount
unlike a direct debit which can vary.
Surplus income
This means the amount of money which you have left over when
you subtract necessary expenditure from your income.
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DEBT GLOSSARY - T
Tax credits
Tax you receive back in certain
circumstances, e.g. pension credit, child tax credit and
working tax credit.
Tax Codes
Under the PAYE system of taxing
income, tax codes are allocated annually to employees. These
codes enable the employer to deduct tax at the correct rate
from salaries or wages on a monthly (or weekly) basis for
remittance to the Inland Revenue. Most codes show a number
followed by a letter. The number refers to the amount of salary
payable free of tax (for example if a person's code is 45OH,
the tax free allowance will be between £4,500 and £4,509 that
is, the first three numbers of the net allowances form the
number of the code).
The letter denotes that various
personal and other allowances are included.
Taxable earnings
The amount of an
individual's annual income on which tax is payable defined as:
Taxable earnings = Income - Reliefs - Allowances Third
Party. A
third party is the person who claims against an insured person
when loss or damage to property or injury has occurred as a
result of the insured person's negligence. A
trustee is the person who claims against an insured person when
loss or damage to property or injury has occurred as a result
of the insured person's negligence.
Trust deed
A form of debt relief where
you're unable to pay your debts but have money tied up in
assets, such as a house. Creditors can agree that you give
everything you own to a trustee (usually an accountant) and
sign a trust deed, which is legally binding. The trustee offers
to pay your creditors as much as possible of what you owe them
from the value of your assets. If it is a protected trust deed
then the trust deed is a diligence stopper.
Trustee in bankruptcy
One appointed by a
bankruptcy court, and in whom the property of the bankrupt
vests. The trustee holds the property in trust, not for the
bankrupt, but for the creditors.
Trustor
The borrower under a deed of trust
is a trustor.
Trustee
Usually an accountant (a qualified
insolvency practitioner), a trustee acts for the creditors by
managing the trust deed when a debtor agrees to sign over their
assets into a trust deed or when they are declared bankrupt.
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DEBT GLOSSARY - U
Unsecured creditor
A creditor who does not
hold security (such as a mortgage) for money owed.
Unsecured Loan
An unsecured loan is a loan
where the lender has no entitlement to any of the borrower's
assets in the event of the borrower failing to make the loan
repayments. Such a loan normally carries a higher interest rate
than a secured loan.
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DEBT GLOSSARY - V
Value
The worth or desirability of
something expressed as an amount of money.
Variable interest rate
Interest rates
offered by banks and financial institutions on loans or
deposits which are liable to change according to circumstances.
For example a movement in the interest rate set by the
government would usually be an influence.
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DEBT GLOSSARY - W
Wrap around mortgage
A second or junior
mortgage with a face value of both the amount it secures and
the balance due under the first mortgage. The mortgagee under
the wrap-around collects a payment based on its face value and
then pays the first mortgagee. It is most effective when the
first has a lower interest rate than the second, since the
mortgagee under the wrap-around gains the difference between
the interest rates, or the mortgagor under the wrap-around may
obtain a lower rate then if refinancing.
