Bill payments and managing finances along with debts ain’t an easy task. And if you are someone who struggles with complex debt terminologies, it is only going to get tougher. There are times when you also might get confused between debt collection services and credit bureaus. There are various terms that banks use which might leave you perplexed. To make it a little easier for you, we have discussed some widely used Common Debt Terminologies.
Credit Report- A credit report is a document that contains details about your credit history and current credit position, such as loan repayment history and account status. Credit reports include details like personal information, credit line details, public records such as bankruptcies, and a list of businesses that the consumer owns. The credit bureaus compile this information in credit reports. The majority of individuals have multiple credit reports.
Debt Collection- The process of collecting debts owed by individuals or corporations is known as debt collection. A debt collection agency or debt collector is a company that specialises in debt collection. There are various companies working as agents for creditors. They collect debts in exchange for either fees or a fixed share in the remaining amount. Debt recovery and debt collection are similar phrases with one significant difference. The distinction lies in who is attempting to collect a debt. Debt collection services operate at different scales, varying from operating independently to functioning for attorneys.
Annual Percentage Rate- The APR (Annual Percentage Rate) is used to calculate the annual total cost of credit. It considers the amount borrowed, the interest rate(s) as well as the amount and time of payments. APRs can fluctuate based on several factors, such as broader market movements, the account holder's actions, and other variables.
Credit Limit- The phrase credit limit refers to a financial institution's maximum amount of credit to provide to a customer. Generally, the lenders set the credit limit, which solely depends on the information provided by the credit applicant. A credit limit impacts consumers' credit scores and their capacity to receive credit in the future.
CFPB-The Consumer Financial Protection Bureau (CFPB), also known as the Bureau of Consumer Financial Protection (BCFP), is a US federal body responsible for financial consumer protection.
Debt Consolidation- Debt consolidation allows one to manage several debts all at once. It allows the users to combine several debts into a single loan, given they are paying multiple debts.
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