Definitive Guide to a Debt Free Life – Chapter 17: FAQ and Glossary of Common Terms

One of the most difficult parts of living a debt free life is actually understanding the terms surrounding debt.

Simply put, there are a lot of them. And going head on into the world of debt relief without at least a tentative grasp of them is a recipe for a waste of time (and potentially disaster).

That is why we have dedicated the final chapter of The Definitive Guide to a Debt Free Life to sorting out these common debt terms. We also have answered a few of the most frequently asked questions regarding debt relief and debt help.

This FAQ and Glossary can be referred to throughout your reading of this guidebook or it can be read in order as an individual chapter of its own.

debt glossary

Whichever way you decide to read it, we hope that this guidebook has been and continues to be helpful on your path to the debt free life.

Glossary of Common Terms

A few of the most common terms that anyone and everyone struggling with debt needs to know include:

Secured Debt: Debt (borrowed money) that is secured with an asset that acts as collateral. Examples include property or an automobile. If the terms of the agreement are not met, the asset can be taken away.

Unsecured Debt: Debt (borrowed money) that is not secured with an asset that acts as collateral. Examples include credit cards. Nothing is taken away if the agreement is not met. Rather fees and penalties keep piling up.

Debtor: A person that is in debt with an outstanding balance.

Creditor: The person (usually an individual or an organization like a bank or credit card company) that lends money to other individuals.

Lender: This term is used interchangeably with creditor.

Debt Relief: The act of seeking relief from your debt burden. There is DIY (do it yourself) debt relief in which the debtor tackles the problem themselves (with a budget plan and expense management) and professional debt relief in which the debtor seeks the help of an organization’s services (debt consolidation and debt management).

Debt Consolidation: A popular method of professional debt help. Combining all of your current overdue debts into a single monthly payment, oftentimes for the benefit of making organization easier and for a lower overall interest rate.

Debt Management: Another popular method of professional debt help. It is a formal agreement between a debtor and a creditor for new terms of repayment, oftentimes including smaller monthly minimums and a reduced interest rate.

Credit Counseling: One of the most effective forms of debt relief. It is basically counseling for your credit and financial health. Helps you learn better money management skills so that when you get out of debt you stay out of debt.

Bankruptcy: A legal process that potentially wipes off all of a debtor’s debts. Equity or assets might be sold to cover a creditor’s losses.

Assets: An item owned by the debtor with monetary value. Stock, savings, property, and automobiles are common.

Equity: The difference between market value and the mortgage for a debtor’s property. Negative equity is when the loan balance is greater than the actual market value of the home.

Collateral: A debtor’s pledge of a specific asset to a creditor as a promise to pay back a loan. (

FAQ Regarding Debt

There are dozens upon dozens of questions that you might have about your debt situation. Below are a few of the very most frequently asked. If your own question does not make our list of FAQ regarding debt, a credit counselor or financial advisor will no doubt be able to provide answers.

A few FAQ regarding debt include:

  • When do I need debt help? – Debt help should be sought as soon as you realize you are not keeping up with your payments. There is no monetary amount of debt that you should be in before you take action. It is different for everyone. It depends on your income, the amount of debt you are in, the type of debt you are in, and how long you have been in debt. If you feel helpless, are falling farther and farther behind each month, or cannot create a solid plan yourself, you need to seek debt help and debt relief.
  • How do I find a good credit counselor? – Need debt help? Then your first stop should be a credit counselor. But not just any old credit counselor. Use our debt relief directory for a start and do not be afraid to shop around a little at first. The Better Business Bureau is a great resource to check the reliability and reputability of different organizations.
  • How do I avoid a debt scam? – Like any high stakes or high emotion industry that involves money, the world of debt relief contains numerous scam companies. It is very important to avoid these frauds otherwise you might find yourself even deeper in the debt hole. Start with the same steps as finding a good credit counselor. Check the reputability and reliability of debt settlement companies. If possible, go with an organization that someone you know has experience with. Our blog posts on How to Avoid Common Debt Settlement Scams and Avoiding Debt Consolidation Scams are great places to learn more.(

Congratulations! You have reached the end of The Definitive Guide to a Debt Free Life. You have no doubt come a long way and learned a lot since beginning this guidebook.

We sincerely hope that the tools, advice, and information we have shared with you make a difference in your life by reducing your debt burden and getting your financial life back on track.

Remember, we all wish we could get out of debt by ourselves, but almost all of us could benefit from debt help at one time or another. Do not be afraid to ask for or seek out help, especially in the form of credit counseling.

And feel free to contact us to ask any further questions that you might have.
Thank you for reading!


  • Jubilee Debt Management, “Debt Glossary of Terms”


  • Bank Rate, “FAQ About Debt and Credit Counseling”

Leave a Reply

Your email address will not be published. Required fields are marked *