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Adjustable Rate:
The interest rate for a loan/line of credit that may vary over the life
the obligation. For example, the interest rate may begin at 9% but
increase to 15% while still repaying the debt.
APR:
Annual Percentage Rate; a year's worth of interest computed into the final
percentage.
Average Daily
Balance:
The calculation of interest used by
creditors to assess interest owed on an outstanding balance. Creditors
calculate the interest that would be owed everyday of the billing period,
based on the balance for that day.
Cash Advance:
Borrowing cash from a line of credit. Although the cash is borrowed from
your credit card, the interest rate for the cash advance is usually much
higher than the APR when you purchase merchandise. Also, beware that you
have to pay the purchase balance off before you start paying the balance
on the cash advance.
Chapter 7 Personal
Bankruptcy: this is the process
by which the court discharges a debtor's debts. The individual is exempt
from repaying those debts that apply. A bankruptcy will remain on a
consumer credit file for 7 to 10 years.
Chapter 13 Personal
Bankruptcy: where the court
arranges a payment plan for the debtor to pay back all debts in affordable
installments. A bankruptcy will remain on a consumer credit file for 7 to
10 years.
Charge-off:
When a creditor is unsuccessful collecting a past due debt. The creditor
then decides to either pursue the delinquency through legal actions or
sell the account to a third party collection agency for further collection
activity. In both cases, the charged-off account will appear on the credit
file until paid or for a time period of 7 years.
Collections:
A third-party company that purchases past-due accounts from creditors at a
discount and attempts to recover the original balances with interest. Many
creditors have their own collection agents "in-house" who are actual
employees of the bank. These agents employ more intimidating and coercive
tactics with each call they make. Their job is to make your situation
uncomfortable so you pay them off as quickly as possible.
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