If you want to get into a debt settlement program, you would usually be interviewed first to see if you would meet their eligibility requirements. Throughout the course of your conversations, you should expect to encounter a dozen or so terms that you may not be familiar with.

While the credit counselors that you are talking with would usually be accommodating to explain the terms that you do not understand, it would still be better if you already have an idea about the terms that they are using.

Here are some important terms that you need to understand about debt settlement:

Charge-off

A charge off is when a debt is considered uncollectible already and is already stricken off by the bank from their records of active accounts.  They could either consider this as a bad debt, or sell it off to collections agencies.

This is what the banks are trying to avoid which is the reason why you would have some leverage when going for negotiations for debt settlement.

Debt to Income ratio:

The debt to income ratio is the percentage of your monthly expenses (including the payments to the debt settlement program) in relation to your monthly income.  This is usually used to determine your negotiations for debt settlement.

Delinquency:

Delinquency refers to your failure or inability to make the regular monthly payments to your debt on time.

Secured Debt:

A secured debt is when the creditor has some protection from loss because the debt is secured with a valuable property. This means that when a debt is not repaid, the creditor would have  a legal right to acquire the valuable property and sell it for payment.

Unsecured Debt:

An unsecured debt is a debt that is not secured with any valuable property. This is more risky for the lender as they do not have any protection once the debtor has lost his ability to pay.