Commonly used concepts in financial matters: borrowing and debt

It was recently in the news: Dutch people have no idea about money. Research shows that many people do not even know how much interest they pay for overdrafts on their bank account. It is worrying that a large proportion of consumers are financially ignorant, especially in these times of economic crisis. In financial matters, terms are used that many people can use some explanation. A number of concepts from the world of borrowing and debt with explanation.

Money matters: general

Borrowing money is relatively easy: the offers come to us every day through television advertising and advertisements. Taking out a loan is easy: you don’t even have to leave your house. Paying off the loan on time may be more difficult than you thought; With the interest added, the monthly amount quickly increases. Before you know it you will have to deal with a smaller or larger debt, and then just try to get rid of it. It starts with overdrawing the bank account and then there is the credit card, the mail order companies…

  • Concepts of borrowing
  • Debt concepts

To borrow

Buying a new phone, going on a long holiday trip: it is tempting to borrow some money to finance what you want to do. You are short on cash, but saving takes a very long time; Taking out a loan is then the next step. This loan is subject to conditions regarding, for example, the costs associated with taking out a loan, the duration of the agreement, and so on. You want to be able to understand those conditions in order to decide what you do. However, there are often concepts involved that you may not immediately understand what they mean.

Debts

If you are no longer able to make ends meet or pay back borrowed money on time, you will have to deal with debts. This could be a smaller or larger debt. Sometimes you can still work it out by paying it off yourself. If that is no longer possible and you have to borrow to pay off a debt, it becomes more difficult. Another debt arises and it soon becomes a problem that you can no longer solve on your own. Then debt counseling is involved, where you need to know what is meant by all the terms used.

Concepts related to borrowing and debt

Below are two overviews: the first contains concepts about borrowing, followed by an overview with concepts related to debts. Some terms may apply to both, but appear once.

Concepts of borrowing

a

installment : you may pay a certain debt in parts, usually a fixed amount per month; you can borrow or buy on installment repayment : this refers to the part that is repaid, in the case of a loan, closing commission : the costs charged by the bank when you take out a mortgage car loan : loan that is specifically taken out to buy a car to buy

b

investment credit : credit where you do not repay anything; you only pay interest BKR : Credit Registration Office: informs affiliated organizations about loans and/or telephone subscription that you have or have had in the last five years. Helps the lender to see whether someone can still take out a loan. Repayment without penalty : repaying the loan in full in one go without having to pay a fine. Budget management : it means that someone’s income is managed by an independent, third person.

c

consumer credit : forms of loans used to purchase items that are not durable credit card : card issued by credit card organizations such as Master Card or Visa. You can pay with this card in shops, hotels and restaurants in most countries and on the internet, up to a certain limit. The amounts will later be debited from your checking account, with interest added

D

revolving credit : loan where you can continuously withdraw money up to a certain limit. You pay back an amount every month

E

effective interest rate : is the actual cost of a loan, this is expressed in percentages per year

F

tax authorities : the tax authorities flash loan : a loan where the term is short and the amount to be borrowed is low

G

money credit : a loan where you can spend the money you borrow as you wish; goods credit : loan for the purchase of, for example, a car or boat where the money that is borrowed immediately goes to the seller; so you cannot use the money for anything else

H

joint and several liability : when two or more people take out a loan together, the creditor can claim the entire amount from each of them. Rental purchase : a form of borrowing in which you pay a fee per certain period and are therefore officially a tenant. After payment has been made, you become the owner of the rented mortgage loan : mortgage; this is a loan with real estate as collateral, such as a house

K

credit : loan credit offer : advertising/advertisements containing offers about loans creditor : someone who provides a loan credit card : another name for credit card credit limit : if you have paid part of the amount of a loan, you can often make new purchases on credit , up to a certain limit (limit) borrower : the person who borrows money from the person who provides the loan credit fee : the interest and costs charged for a loan by the person from whom the loan is taken out lender : the party that you the money borrows creditworthiness : the lender checks whether you are creditworthy before a loan is granted; For this purpose, the Credit Registration Office will check whether you are already known there

L

lease : construction in which something is purchased, for example a car, which is later repaid through repayments and interest term : the period within which a loan must be repaid

M

monthly interest : the interest that you have to pay every month on the loan maximum interest rate : the statutory interest, increased by 12 percent co-liability : if you have signed an agreement together with someone else, you are co-liable for the repayment, even if the agreement not concluded for you mini-loan : loan for a small amount, to be taken out via the internet or text message.

N

nominal interest : the interest per period that interest is paid out on savings or paid on a loan, often expressed in percentages per year

O

bridging loan : loan that must bridge a short period of time life insurance : an insurance policy that pays out an agreed amount in the event of death, with which (part of) the mortgage is repaid refinancing : re-concluding (with another or the same company) a current mortgage at better rates conditions or a lower interest rate

P

personal loan : loan where you borrow a certain amount in one go and from then on you pay back a fixed amount per month to the bank mail order credit : a loan that can be taken out from a mail order company; You pay for purchased items in installments, also known as purchasing on installments

R

overdraft : borrowing on a current account, the same as overdraft interest : (also called interest) the compensation that someone receives for lending their money and that is paid by the person who borrows the money residual debt : that part of a loan that after the sale of the collateral, for example a house with a mortgage, there remains an overdraft : a loan on the checking account, the same as a negative balance

S

savings loan : a loan where you repay by means of savings insurance, the person who borrows has a debt that he does not repay during the term

T

installment payment : the payment per period by the person who lends to the lender

V

variable interest rate : means that the interest rate is not fixed for the entire term fixed interest rate : a predetermined interest rate that remains the same during the term of the loan default interest rate : interest that the person granting the loan may charge if you pay late early repayment : the making one or more installment payments earlier than agreed

W

usurious interest : much too high interest, charged in case of abuse

Debt concepts

a

reminder : letter in which the writer requests payment of an outstanding bill adjustment debt : if you experience a major change, such as losing your job, this may arise because your income decreases repayment capacity : the maximum amount you can pay each month to repayment space to pay off your debts : amount you can pay off your debts per month

b

budget : an estimate of your income and your known expenses, viewed for a certain period in the future, seizure-free amount : the part of your income that you can keep for your fixed costs and to live on payment arrangement : arrangement in consultation with the person at who you borrow about repaying the loan if you are in arrears with payments administrator : administrator, authorized representative; This could be someone from debt counseling or, for example, a lawyer. Asset seizure : a measure whereby a bailiff can remove property from the owner, who then no longer has access to it. Penal interest : can be calculated if you are behind in paying repayments; you must then pay an additional amount of interest on the overdue amount Debt Assistance Bureau : agency that helps find a solution for clients with problematic debts; This not only concerns financial help, but also psychosocial support

c

compensation debt : debt caused by psychological problems such as drug addiction or purchasing addiction

D

summons : an official, written summons to appear before the court bailiff : works on behalf of a creditor, collects debts but may also summon someone; seize or evict a house

I

debt collection agency : a company that collects debts on behalf of a creditor collection costs : costs that may be incurred by a creditor if someone with a debt does not pay or does not pay on time income support measures : different types of benefits to help people earn a living or to support this if they need it inventory : overview of all debts

K

remission : voluntarily giving up, for example, a credit balance

L

wage attachment : if you do not meet your payment obligations, the bailiff can seize (part of) your income

M

authorization : method of payment in which an account holder gives an organization (the authorized representative) permission to transfer money once or more. amicable agreement : see amicable debt settlement. amicable debt settlement : is often the first step in debt restructuring. An attempt is made to reach an agreement (amicable agreement) between the creditors and the person who has to pay about the repayment of debts

N

negative balance : if there is a shortage of money on the current account NVVK : Dutch Association for People’s Credit

O

overspending debt : if you often spend too much money on expensive things, while in principle you should be able to get by survival debt : if you earn too little for what you have to pay monthly for your fixed costs, this can occur if you have to live on little money

P

positive balance : if there is money left in the checking account

S

balance : the difference between what you have received and what you have spent debt mediation : helping someone to resolve a debt situation, mediation is done to reach an arrangement with creditors without borrowing money. The person who has to pay does this monthly to the mediator, and the latter pays the amounts to the creditors creditor : a person or institution that is owed money by someone because of an agreement between the two, for example about goods or services debtor : a person or institution that owes money to a creditor because of an agreement as described above debt restructuring : is a voluntary debt settlement, just like mediation; the care provider makes a payment proposal to all creditors

V

fixed costs : amounts that must be paid every month, such as gas, water, electricity, insurance VLTB : Free To Let Amount: the minimum amount you need to live on claim : claiming something, claiming something something

W

legal process : if an amicable settlement has first been proposed to the creditors and one or more creditors do not agree, a request can be submitted for this arrangement Wsnp : Debt Restructuring of Natural Persons Act; arranges the possibility for people with financial problems to reach settlements with creditors through the courts, so that they can become debt-free again. These overviews can be further supplemented.