Debt Related Definitions
Forbearance is the deferment or postponement of a loan or debt that is granted by the creditor or lender to the debtor. This deferment is usually temporary in nature.
One example of loan for which a forbearance may be granted is a student loan. The lender may be gracious enough to allow a newly graduated student the time to find a job before being expected to pay back the loan for their education.
The discharge of debt occurs in Chapter 7 bankruptcy. When a person's debts have been discharged, that person is no longer responsible for the debt and no longer be pursued for the collection of the debt. Discharge of debt is intended to give the person in debt a fresh start by completely erasing the debt.
Secured debt is a loan or debt for which physical property has been used as collateral to ensure the repayment of the loan. Secured debt is exempt from bankruptcy proceedings.
A home mortgage is one example of a secured debt. If the borrower defaults on payments, then the lender can seize their home and sell it for repayment of the loan.
Assets used to back a loan or debt are called security. This is because the assets ensure or secure the repayment of the loan or debt because of the fact that the assets can be seized by the creditor for default on the loan.
Security is the reason why unsecured loans are granted at such a high rate of interest. If the debtor defaults (cannot pay) on an unsecured loan, the creditor has no physical property to seize.
Payday loans are known called many things: cash advance, personal loan, paycheck loan and/or title loan. Regardless of the name, payday loans are often the only loan option available to individuals with bad credit. We recommend that you steer clear of these companies. If you're barely making ends meet as it is, a payday loan will only exacerbate the problem, and you'll wind up rolling the loan over and paying only the interest. This is precisely what they want.
Payday loan companies are rapists that take advantage of people who can little afford it. Do not ever take out a payday loan or a car title loan because if you're behind the 8 ball already, these rotten, parasitic companies will only make matters worse.
These companies charge much higher interest rates than the traditional corner loan shark ever thought of charging. Most charge upward of 400% interest and are vicious about repayment. This is because these companies have a very powerful and wealthy lobby in Washington and they have paid heavily for the laws that allow them to do business.
An acceleration clause is a provision in a loan agreement that grants to the lender the power to demand immediate payment in full upon the violation of specific loan provisions, such as the sale of the property, or the failure to make timely payments.
This could possibly occur if, for example, Billy sells his car to Joan and Joan takes over his payment. If they fail to notify the lender of this transaction, the lender could call the loan, if the loan documents state that the loan is due on the sale of the property. Now Billy is liable for the balance of the loan even though he and Joan agreed on their deal.
If real estate or property is unencumbered, it is free of liens or creditor claims and is owned outright. Unencumbered property is land that is owned free and clear and has no mortgage. Unencumbered stocks have been purchased with cash and not on margin.
Unsecured debt is debt which has no physical property attached to it as collateral. An example of unsecured debt is the balance on a regular credit card.
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