We aim to make our website as accessible as possible. However if you use a screen reader and require debt advice you may find it easier to phone us instead. Our phone number is 0 8 0 0 1 3 8 1 1 1 1. Freephone (including all mobiles).
StepChange Debt Charity logo

Debt glossary. A definition of debt terms.

Not sure what a balloon payment is? Struggling to work out the difference between APR and AER? Use our debt glossary to find out what the most common debt terms mean.

A    B   C   D   E   F   G   H   I   J   K   L   M   N   O   P   R   S   T   U   V   W


Administration Order

An administration order is a way of repaying your debts if you can't afford the full payment each month. The courts administer payments to your debts. You need to owe less than £5,000 and have a county court judgment to apply.


AER stands for the Annual Equivalent Rate. This is used to show what you would earn in interest on a savings account. Any interest is added to the balance in your savings account. The next interest payment is then based on the new balance.


APR stands for the Annual Percentage Rate. This shows the amount of interest on a credit agreement, it takes into account all the charges made under the agreement. It will let you compare the cost of each deal and work out which is the best value for you. You can use it to compare one hire purchase agreement with another. But you shouldn't use it to compare different types of credit, such as a mortgage with a credit card as each one will have different terms.


Arrears are another term for missed payments. If you miss one month’s payment to a household bill or debt you'll be in arrears by one month.

Arrestment (Scotland)

Arrestment is a method the Scottish courts can use to repay your debt. The courts freeze any bank accounts you've got and can use any money in that account to pay your debt.

Arrestment of earnings (Scotland)

Arrestment of earnings is a method the Scottish courts can use to repay a debt. Your employer will take money straight from your wage and pay it to the creditor.


An asset is something of value this could be a house, a car or an antique.

Attachment (Scotland)

Attachment is a way of enforcing an unpaid court order. Sheriff officers will remove goods from outside your house. The goods will be sold and the money put towards your debt.

Attachment of benefits

Attachment of benefits is a method the courts can use to repay a debt. The Department of Work and Pensions will take money from your benefits and pay it to the creditor.

Attachment of earnings

Attachment of earnings is a method the courts can use to repay a debt. Your employer will take money straight from your wage and pay it to the creditor.

Back to top




Bailiffs are officials who can take away someone’s goods. Creditors use bailiffs to collect outstanding debts. They can remove non-essential belongings from your property. They then sell your goods and put the money towards your debt.


Bankruptcy is a the legal procedure where the courts write off debt that you can't pay back in a reasonable amount of time. If you've got any assets they will be sold to pay back your debt.


A beneficiary is someone who is going to receive assets or profits from a trust, an estate or an insurance policy, when the conditions within the contract are met.

Balloon payment

A balloon payment is a one off, lump sum payment on a hire purchase or conditional sale agreement. They are normally made at the end of the agreement.


A bond is an official paper given by the Government or a company to show that you've lent them money. It says that they will pay you back at an interest rate that doesn't change.


A broker is a person (or it could be an organisation) who works on your behalf to find you the best deal when you buy things like insurance, mortgage, stocks or property.


A budget is a list of all the money you've got coming into your household (your income) and all the money you spend (your expenditure), each month. If you take your expenditure away from your income, it shows you if you've got a budget deficit or a budget surplus.

Budget deficit

If you're spending more money than you've got coming in each month, you have a budget deficit.

Budget surplus

If you have money left over from your income once you have paid for all your costs, you have a budget surplus.


Budgeting is when you make a list of everything you spend and managing your money so you stick to this list.

Buildings insurance

Buildings insurance contributes towards the cost of repairing or rebuilding a property if something happens to it, like repairing flood damage.

Back to top




Capital is money that you use to generate income or make an investment.

Capped rate

A capped rate is an interest rate or price that can vary but it will have a fixed amount that it won't go above. This often applies to products such as mortgages and energy bills.

Certificate of satisfaction

This is a document from the court as proof that a court order, such as a county court judgment, has been paid.

Charge for payment (Scotland)

A charge for payment is a legal notice served in Scotland. It orders you to pay the debt in full within a certain amount of time.

Charging order

A charging order attaches an unsecured debt against a property or land. It turns an unsecured debt into a secured debt. If you have a county court judgment your creditor could apply for a charging order.

Child benefit

Child benefit is a regular (weekly or 4 weekly) tax-free benefit payment made to anyone who is responsible for a child or young person. In most cases it's paid until the child is 19 as long as they’re in full time education or training.

Child tax credit

Child tax credit is a means-tested benefit for parents and carers of children and young people. In most cases it's paid until the child is 19 as long as they’re in full time education or training.

Company pension

A company pension is a pension plan where you and your employer make a monthly contribution. The amount you pay is tax free. From October 2012 every employee will be automatically opted in to their employer’s pension plan.

Conditional sale

Conditional sale is a type of credit agreement where you don’t own the goods until you’ve made all of the payments set out in the credit agreement. If you miss payment the goods may be repossessed.

Contents insurance

Contents insurance is a type of insurance that contributes towards the cost of repairing or replacing possessions if they are stolen, lost or damaged.

Contractual payment

A contractual payment is the amount that you agreed to pay back towards a debt each month when you first signed the credit agreement. If you don’t pay the contractual payment you will fall into arrears and it may affect your credit rating.

County court claim

A county court claim is a legal process your creditors can use to collect an outstanding debt.

County court judgment

A county court judgment is a court order that tells you what to pay towards a debt.

Credit file

Your credit file contains details of the money you’ve borrowed and the payments you’ve made towards a debt. Your credit file will also have information about any types of credit you have applied for.

Credit rating

Your credit rating is the method a creditor uses to assess whether they want to lend you money. All creditors will use different information to assess you and will score you differently.


A creditor is a person or a company (usually a bank) who lends you money.

Critical illness cover

Critical illness cover is a type of insurance which provides a lump sum payment if you’re diagnosed with a specific illness.

Back to top



A Debt is an amount of money owed.

Debt Arrangement Scheme

The Debt Arrangement Scheme (DAS) is a statutory scheme run by the Scottish Government to help people living in Scotland repay their debts.

Debt collection agency

Debt collection agencies are organisations that chase outstanding debts. They are either employed by creditors to recover the debt or they can buy the debt from the creditor.

Debt consolidation

Debt consolidation is the term for taking out a loan and using the money to repay other debts.

Debt management plan

A debt management plan is a way of repaying your debts by making reduced payments to your creditors if you can’t afford the full contractual payments.

Debt payment programme

A debt payment programme (DPP) is the name given to the formal repayment programme provided under the Debt Arrangement Scheme (DAS). A DPP lets you repay your debts over a realistic amount of time without the threat of court action from your creditors.

Debt relief order

A debt relief order is a way of writing off your debts if you’re unable to pay them. It’s a form of insolvency. You have to owe less than £15,000 to apply for a debt relief order


A debtor is someone who owes money.

Decreasing term assurance

Decreasing term assurance is a type of life assurance that pays out a lump sum if you die within the term, but where the amount that’s paid out reduces during the term.

Decree (Scotland)

A decree is a judgment or order, issued by the Scottish courts for non-payment of a debt.

Diligence (Scotland)

Diligence is the term for debt enforcement through the Scottish courts.

Default notice

A creditor issues a default notice when the terms and conditions of a credit agreement are broken, for example if you can’t pay your contractual payments.


A dependent is someone who relies on others financially, for example a child.

Direct debit

A direct debit is an instruction that you give your bank to pay a certain person or company each month. A direct debit can be for a variable amount.

Discount rate

A discount rate is an interest rate that’s reduced for a certain amount of time before it reverts back to the standard rate. Discount rates are often offered as a type of mortgage rate, or for energy bills.

Disposable income

Disposable income is the amount of money which you have available to spend on non-essential items after you’ve paid for your household bills.

Back to top


Early repayment charge

Early repayment charges or redemption penalties are sometimes paid to lenders if you clear the debt before the agreement has ended.


An endowment is a type of life insurance policy that is often used as a way to repay a mortgage where only the interest has been repaid to the lender.

Enforcement of Judgment Office (Northern Ireland)

The enforcement of judgment office or EJO are responsible for collecting unpaid court debts in Northern Ireland


Equity is the difference between the value of your house and the amount outstanding on your mortgage and any secured loans. For example, if your house is worth £100,000 and you have a mortgage for £40,000 you will have £60,000 in equity.


Anything you own is your estate, for example your house, car and personal belongings. It also includes any rights you have to receive money or goods in the future.


Eviction is the legal process used to force you to leave your home. Bailiffs may change the locks to the house if you don’t leave voluntarily.

Exceptional attachment (Scotland)

Exceptional attachment is the removal of non-essential belongings from your house. The goods will be sold and the money put towards your debt.


Expenditure is all the money you spend on any outgoings or costs.

Back to top


Family income benefit

Family income benefit is an insurance that, in the event of a claim, pays out a regular income for the remaining term of the policy, instead of a 'one-off' lump sum.

Final discharge

A final discharge is a court notice that shows your bankruptcy has ended. This document will mean you’re debt free and the bankruptcy period is over.

Final salary plans

A final salary plan is a pension that is based on the number of years of service and the value of your final salary.

Fixed rate

A fixed rate is an interest rate that doesn’t changed for a set period of time.

Back to top



Gross is the total amount before any deductions. For example, gross salary is the total amount of your salary before the deduction of tax and National Insurance.


A guarantor is someone who agrees to pay a debt if the person who owns the debt fails to do so.

Back to top


Hire purchase

Hire purchase is a type of credit agreement where you don’t own the goods until you’ve made all of the payments set out in the credit agreement. If you miss payment the goods may be repossessed.

Back to top



An IFA is an independent financial adviser. They are individuals who offer advice on financial products and investments. They are separate from any company providing the financial products.


Income is any money you receive, for example wages, pensions or benefits.

Income protection

Income protection is a type of insurance. It provides a regular monthly income to replace your wage if you’re unable to work because of an accident or illness.

Income support

Income Support is a means-tested benefit for people who are on a low income.

Income tax

Income tax is an amount you have to pay on everything you earn and any pensions or investments you’ve got.

Individual voluntary arrangement (IVA)

An individual voluntary arrangement is a legally binding agreement between you and your creditors. Through an IVA, you pay back an agreed proportion of your debts over a set amount of time, usually 5 years.

Increasing term assurance

Increasing term assurance is a type of life insurance. It pays out a lump sum if you die within the term. The amount that is paid out increases the longer the insurance runs for.


Inflation is the rate at which prices for goods and services rise over time.

inheritance tax

Inheritance tax is an amount your beneficiaries have to pay when you die. The amount they have to pay depends on the amount of assets you leave at the time of your death.


A person or a company is insolvent when they can’t afford to repay their debts in a reasonable amount of time and any assets they own are worth less than the amount of money they owe.


Insolvency is a legal process to get your debts written off. Insolvency solutions include bankruptcy, trust deeds and debt relief orders.

Insolvency practitioner

An insolvency practitioner is a person who is legally allowed to help people who can’t repay their debts.


Insurance is a contract between two people in which one party agrees to compensate the other party for any loss or damage caused by risks identified in the terms of the contract.


Interest is a charge for borrowing money or reward for saving money.

Interest rate

An interest rate is an amount of money that’s added to credit, such as a loan, or paid on a credit balance, such as savings. It is normally shown as a percentage, for example 17.5%

Investment fund

An investment fund is a pool of money that’s managed professionally.

Irregular bill

An irregular bill is one that you only pay occasionally, rather than every month or every week.


An ISA is an individual savings account where you don’t have to pay tax on the money you save. But you’re only allowed to save a certain amount of money in the account.

Back to top


Joint and several liability

Joint and several liability is where two people enter into a credit agreement and both are responsible for repaying the whole amount borrowed, rather than just half each.

Joint life second death policy

Joint life second death policy is a type of life insurance that only pays out on the death of the second policy holder.

Back to top


Key facts document

A key facts document is a document given to you by the provider of financial products. It will clearly show you the costs and features of a particular financial product.

Back to top


Late fees

Late fees are charges that may be added to your account if you make a payment after the date you originally agreed.

Level term assurance

Level term assurance is a type of life insurance. If you die within the term it pays out a lump sum. The amount you will be paid remains the same throughout the whole term.


The power to levy is what lets bailiffs seize and sell goods.


Liability is when you’re responsible for paying something. For example, making repayments on a credit agreement, utility bill or tenancy agreement.

Life cover

Life cover is a type of insurance. It pays out a lump sum if you die during the term of the policy.

Back to top


Maximising income

Maximising income is a way of increasing the money you receive.

Means testing

Means testing is the method the Government uses to decide if you’re eligible for certain benefits.

Money Judgment (Northern Ireland)

A money judgment is issued by the Northern Irish courts for non payment of a debt.

Money purchase agreement

A money purchase agreement is a form of pension where your final pension depends on stock market performance.

Monthly expenses

Monthly expenses are regular items you pay for each month. They include your household bills and payments to your debts.


A mortgage is a loan that you take out to buy a house. If you miss payments to a mortgage, your lender could try to repossess your property.

Back to top


Non-priority debts

Non-priority debts are debts, if you don’t make payments, the consequences aren’t that serious so you can’t lose your home or be sent to prison.

Back to top


Official receiver

The official receiver is a court official who deals with bankruptcy.

Outright possession order

An outright possession order is a court order that’s granted at a repossession hearing. It means that the courts have given the lender ownership of your property. You will be given an eviction date for 28 days later. By this date you will need to move yourself and your belongings out of the property.

Back to top


Payment holiday

A payment holiday is when a creditor agrees to let you stop making repayments on a debt for a fixed period of time.


A pension is a long-term investment plan that provides a lump sum or monthly income when you retire.

Pension credit

Pension credit is a means-tested benefit available to people who are over state pension age and have a low income.


A policy is a legal document issued to you by an insurance company. It states the terms and conditions of the insurance.


PPI or payment protection insurance is a type of insurance that’s sold alongside loans, credit cards or mortgages. It covers repayments for a set period of time if you can’t pay because of an accident, illness or unemployment.


A premium is a single or regular payment made to a company for a product.

Priority debts

Priority debts are ones where, if you don’t make a payment, the consequences can be serious, for example loss of your home or imprisonment.

Private pension

A private pension is a type of pension that you pay and doesn’t include any additional contribution by employers or the Government.

Back to top


Redemption penalty

Redemption penalties or early repayment charges are sometimes paid to lenders if you clear the debt before the agreement has ended.


Repossession is the legal process where a mortgage lender or secured loan provider takes ownership of a property. If you miss mortgage payments, your lender may ask the courts to evict you from your house. Your lender will then sell the property.


Remortgaging is when you take out a new mortgage to pay off an existing one, using the same house as security.

Right of Offset

This can happen when you’ve got a bank account and a debt with the same bank. If you miss payments to the debt, your bank can take money out of your bank account to cover the payments you’ve missed.

Back to top


Section 2 order

A Section 2 order is a court order that you can apply for at a repossession hearing. You can apply for a section 2 order if you want to stay in the property and can come to an arrangement to clear your mortgage arrears. You can also use a section 2 order to ask for time to find alternative accommodation if you can’t afford to stay in your home.

Secured loan

A secured loan is a loan that is attached to your house. If you miss payments to a secured loan, your lender could try to take ownership of your property.

Sequestration (Scotland)

Sequestration is Scottish bankruptcy. It’s the legal procedure to write off debt that you can’t afford to pay back in a reasonable amount of time. If you’ve got any assets they will be sold to pay back your debt.

Sherriff officer (Scotland)

A sheriff officer is a Scottish court official. They are responsible for enforcing judgments and issuing court forms.


If you sell an item for less than the amount owed on the debt secured to it you’ll have a shortfall. For example, if you sell your house for less than the value of your mortgage. Your lender will expect you to repay the shortfall.

Standing order

A standing order is an instruction you give to your bank to pay a certain person or company each month. A standing order has to be for a fixed amount.

Stakeholder pension

A stakeholder pension is a type of pension that has to comply with certain Government standards. Stakeholder pensions are available from commercial companies such as banks, insurance companies and building societies.

Statutory demand

A statutory demand is a court order that demands you pay the full amount of a debt within 21 days. If the debt isn’t paid, the creditor can start bankruptcy proceedings.

Sub prime lending

Sub prime lending is the term for lending money to people who don’t have good credit history, normally a higher rate of interest is charged.

Suspended possession order

A suspended possession order is a court order granted at a repossession hearing. It means that your lender can’t repossess your property as long as you make the payments the court asked for each month. This is usually your normal monthly payment and an extra amount to clear the arrears.

Back to top



The term is the amount of time that a legal agreement, such as a policy, lasts for.

Term assurance

Term assurance is a type of insurance that pays a lump sum out if you die during the term of the policy. If you don’t die during the term, then the policy will finish, with no payout made.

Time order

A time order is a way of asking the courts to give you more time to pay a debt if you’ve missed payment. It can change the amount you have to pay each month or the term left on the credit agreement.

Tracker rate

A tracker rate is an interest rate that follows the increases and decreases of another interest rate. For example, a tracker mortgage may follow the Bank of England base rate.

Transactions at an undervalue

A transaction at an undervalue is giving away an asset for less than it is worth. For example, giving away your car to a friend so that it wouldn’t be included in your bankruptcy.

Trust deed (Scotland)

A trust deed is a legally binding agreement, used in Scotland, between your creditors and you to clear outstanding debts you can’t afford to pay. Through a trust deed you pay back an agreed proportion of your debts over a set amount of time, usually 3 years.

Back to top


Unit trust

A unit trust is an investment where a group of people leave their money with a professional manager who manages the total investment fund on their behalf.

Unsecured loan

An unsecured loan isn’t attached to anything. These are normally called personal loans.

Back to top


Variable rate

A variable rate is an interest rate that can increase or decrease. The amount is decided by the lender.

Back to top


Warrant of execution

If you don’t pay a county court judgment, the creditor will ask the courts for a warrant of execution. This gives bailiffs the right to try to recover the debt by taking items from your house and selling them.


A will is an official statement of what you want to happen with any money or property after your death.

Working tax credit

Working tax credit is a means-tested benefit for working people who are on a low income to help with everyday living costs.

Back to top

Helping you become debt free...

“I wish to thank your staff for all the great help they gave me when I was in so much debt.
They were a pillar of support to me.” (Leslie, Essex)

Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

We link to external websites where they contain relevant information for our visitors. We're not responsible for the content of these websites, or any infringement on your data rights under data protection regulations by any external website provider.

*This is the average rating of our service based on the StepChange reviews on Feefo by DMP and DRO clients three months into their solution.

© StepChange Debt Charity 2019