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Debt Management Jargon Explained

Adverse Credit

Credit not paid or not paid when agreed.

 

Annual Review

A full re-assessment of your current financial circumstances 12 months after your plan began.

 

APR

Annual Percentage Rate of charge. The true rate of interest charged on a loan taking into account the total cost of interest and other charges e.g. brokers fees/legal fees. The calculation is set out in statutory regulations.

 

Arrears

Payments not made on borrowing when agreed.

 

CCJ or CCJs - County Court Judgement

An order of a court against a debtor to pay money owed.

 

Cleared Funds

Any payments by you, received into our Client Account that can be drawn upon, irrespective of the method of payment, for example; standing orders, by payment card, debit card, bank giro credits or electronic transfers.

 

Client Account

A non-interest bearing account where any monies paid by you are held.

 

Creditor

The companies you owe money to that are not Priority Creditors. This means all of the people or businesses you have told us you owe money to.

 

Consolidation

Refinance of outstanding debts into one new agreement, normally at a reduced interest rate.

 

Debt

Money owing.

 

Debt Management Arrangement Fee (DMA)

The contract terms that govern the Debt Management Services provided to you by us. This agreement must be fair and in plain, legible English. You have the right to withdraw at any time with no penalty. We request one months written notice to allow proper and professional termination of the agreement with your creditors and to refund any Cleared Funds not disbursed in the Client Account.

 

Debt Management Company (DMC)

A company licensed under the Consumer Credit Act 1974 that acts as your Debt Manager. A DMC will provide advice on how to restructure debts, alter debt repayments and/or achieve early resettlement of debts. This will normally involve negotiating with creditors and providing you with a facility to make a single monthly which is distributed to your creditors. This requires regular reviews of your financial circumstances and/or your on-going monthly payments.

 

Debt Management Plan (DMP)

The DMP, or Single Payment Plan, represents the informal arrangement between you and your creditors whereby we administer the reduced monthly payments to your creditors on your behalf. You make one monthly payment to us and we deduct our monthly management fee and then distribute the agreed amounts to your creditors on a proportional basis, based upon the amount of debt you owe to each creditor. You will receive a monthly statement. In the first statement you will receive details of the total debt you need to repay, the number of creditors and their expected monthly repayments and the total fees payable over the estimated duration of the Debt Management Plan.

 

Endowment

A life assurance policy that is designed to produce a lump sum to pay off an interest only mortgage. There are a number of different kinds of endowment policies: 'with-profits', 'unit-linked' etc.

 

Financial Statement Proposal

A detailed statement of your current financial affairs, listing your income and items of expenditure, including Priority Creditors and unsecured Creditors. This is used as the basis of calculating what you can reasonably afford to pay to your Creditors every month.

 

Home owner

The term used when the customer has purchased their home, normally with the aid of a mortgage.

 

Initial Fee

An initial Fee that is payable by you for setting up the Debt Management Plan and negotiating with your Creditors to accept reduced monthly payments and attempt to get interest and charges on your debts frozen either now or in the near future. The Instruction Fee is calculated using a tariff that takes account of the total value of your debt and the number of creditors.

 

Loan

Money borrowed.

 

Letter of Authority

This form is required, signed by you to give us authority to contact your creditors and to act on your behalf. In many instances the creditors do not need to see these forms, as we routinely deal with them under a formal Data Protection Agreement, however, we require this letter of authority to be on file in the event of a request for inspection by any creditor we are dealing with on your behalf.

 

Monthly Management Fee

A monthly fee for managing your affairs with your listed creditors, providing on-going debt advice, administering payments, issuing statements and correspondence, processing correspondence you receive from creditors, dealing with new creditors or agencies when notified and generally acting on your best interests over the duration of the Debt Management Agreement.

 

Mortgage

A loan to purchase a home where the property is used as security in the event of non-payment of the mortgage.

 

Negative Equity

The situation where the amount owed on a mortgage exceeds the value of the property.

 

Non Status

Where you have numerous CCJs or Mortgage Arrears

 

Past Arrears

Payments not made on borrowing when agreed that have occurred in the past, normally within the last 12 months

 

Priority Creditors

Regular payments and payment arrears for your mortgage, rent, council tax and utility bills. You should not ignore any payment arrangements enforced through a court.

 

Qualifying Debt

The total unsecured debt and the number of creditors listed in your Payment Plan.

 

Remortgage

Loan taken out by a borrower to replace another one secured on the same property. Typically taken out by borrowers switching lenders to achieve a better rate or more affordable monthly repayment. We specialise in this service.

 

Secured Loan

A loan to be used for any purpose. The equity in the property is put up as security against not paying the loan back.

 

Security Address

When taking a secured loan or mortgage, the security address is the address of the property which is being offered as collateral for the loan. Where property is offered as security in this way, lenders are generally prepared to offer more flexible terms and lower interest rates.

 

Settlement Figure

The sum quoted in order for the loan to be repaid during the contracted term.

 

Tenant

Where the customer does not own a home, this includes living with parents.

 

Unsecured Loan

A loan to be used for any purpose. The credit rating or financial position of the applicant is such that no security for the loan is required.