Defining Finance Terms

By Heather Steel on March 21st, 2009

Unless you’ve been hiding under a rock for the past year, you are undoubtedly aware that our society is facing a financial crisis. Every time you turn on the news or go on the internet, you likely hear another story about bankruptcy or foreclosure, and your TV abounds with ads for credit card debt consolidation and home refinancing. But as much as these terms are tossed around on a daily basis, many viewers are not aware of the actual definitions of these finance terms. Here are brief definitions of the popular terms you are likely to be hearing (from dictionary.com):

Bankruptcy (n): inability to discharge all your debts as they come due; “the company had to declare bankruptcy”; “fraudulent loans led to the failure of many banks”

Debt (n): something that is owed or that one is bound to pay to or perform for another: a debt of $50

Debt consolidation (n): the action of combining several loans or liabilities into one loan. Put another way, debt consolidation is the process of taking out a new loan to pay off a number of other debts. Most people who consolidate their debt are usually doing it to attain a lower interest rate, or the simplicity of a single loan. Also known as a “consolidation loan”

Foreclosure (n): a proceeding in which the financer of a mortgage seeks to regain property because the borrower has defaulted on payments

Refinance (v): replacing an older loan with a new loan offering better terms