UK Money and Debt Glossary
Overview
This glossary explains common debt and money words used in the United Kingdom. Terms are grouped by theme (general money words, borrowing, problem debt, legal actions, and debt solutions).
General money and banking terms
Account (bank account)
A bank account is where your money is kept safely by a bank or building society and where your income is paid in and bills are paid out. You can usually see money going in and out on a paper statement, through a banking app or online banking.
Arrears
Arrears are payments you have missed on a bill, loan, rent, mortgage or other agreement. For example, if you should pay £50 every month and you do not pay in February, you will be £50 in arrears.
Assets
Assets are things you own that have value, such as money, savings, a car, jewellery or a house. In serious debt problems, some assets might be sold to help pay what you owe.
Balance
The balance is how much money is in your account or, if it is a credit card or loan, how much you still owe. A positive balance usually means money you have; a negative balance or “overdrawn” account means money you owe the bank.
Budget
A budget is a simple plan that shows the money you have coming in (income) and going out (spending) over a period, usually a month. Budgeting helps you see if you can afford your bills, debts and daily costs and where you might cut spending.
Compound interest
Compound interest means you pay or receive interest on the original amount and also on any interest added before. This can help savings grow faster, but it can also make debts grow quickly if you do not pay them off.
Credit
Credit is money you borrow now that you agree to pay back later, often with interest. Common examples are credit cards, overdrafts, loans and store cards.
Credit history / credit file / credit report
Your credit history is a record of the money you have borrowed and how you have paid it back. In the UK, credit reference agencies such as Experian, Equifax and TransUnion hold this information in a “credit report” or “credit file”, which lenders check when deciding whether to lend to you.
Credit rating / credit score
A credit score is a number based on your credit history that shows lenders how risky it might be to lend to you. If you miss payments or have court judgments, your score usually goes down and it can be harder or more expensive to get credit.
Creditor
A creditor is any person, company or organisation that you owe money to. Examples include banks, credit card companies, energy suppliers, councils and landlords.
Debt
Debt is money that you owe to a person, company or organisation, which you have agreed to pay back. You can also “be in debt” if you have missed payments on bills or borrowed more than you can afford.
Debtor
A debtor is a person who owes money to someone else. In letters, you might see yourself described as “the debtor” and the company as “the creditor”.
Income
Income is all the money you receive, for example from wages, self‑employment, pensions, benefits or tax credits. Understanding your income is the first step in making a good budget.
Interest
Interest is the cost of borrowing money or the reward for saving money, usually written as a percentage. For debts, interest is added to what you owe; for savings, interest is added to what you have.
Priority and non‑priority debts
Priority debts are debts where the consequences of not paying can be very serious, such as losing your home, going to court or having essential services cut off. Examples include rent, mortgage, council tax, gas and electricity; non‑priority debts include credit cards and personal loans, which are still important but usually less urgent.
Types of borrowing and credit agreements
Credit agreement
A credit agreement is the legal contract you sign or accept when you borrow money or take credit. It explains how much you are borrowing, the interest, fees, monthly payments and what happens if you do not pay.
Annual Percentage Rate (APR)
APR is a yearly percentage figure that shows the total cost of borrowing, including interest and some fees. APR helps you compare different loans or credit cards: a higher APR usually means the credit is more expensive if used in the same way.
Overdraft
An overdraft is when your bank allows you to spend more money than you have in your current account, up to an agreed limit. You will normally pay interest or fees on the overdraft, and if you go over the limit the charges can be high.
Credit card
A credit card lets you buy goods or services on credit up to a set limit and repay later, usually in monthly instalments. If you do not pay the full balance each month, interest is added, and only making minimum payments can keep you in debt for a long time.
Store card
Store cards are types of credit you can use with a particular shop or group of shops. They often have higher interest rates than some other forms of credit, so they can be expensive if you do not repay quickly.
Personal loan (unsecured loan)
A personal loan is when a lender gives you a fixed amount of money that you repay in set monthly payments over an agreed period.[8]
If the loan is “unsecured”, it is not directly linked to your home, but the lender can still take court action if you do not pay.
Secured loan
A secured loan is a loan that is linked to something valuable you own, most often a house that you own. If you do not keep up the repayments, the lender may be able to take and sell the asset, for example by repossessing your house.
Mortgage
A mortgage is a long‑term secured loan used to buy a home or other property. If you do not pay your mortgage, your lender can go to court and may eventually repossess and sell your home.
Hire purchase (HP) and conditional sale
Hire purchase and conditional sale are ways of buying items like cars or furniture by paying in instalments over time. You normally do not fully own the item until you have made the final payment, and it can be taken back if you miss payments.
Guarantor loan
A guarantor loan is a loan where another person promises to pay if you do not. If you miss payments, the lender can ask the guarantor to pay instead, which can affect your relationship and the guarantor’s finances.
Payday loan / high‑cost short‑term credit
Payday loans and other high‑cost short‑term credit are loans with very high interest rates, usually meant to be repaid quickly. They are risky because the cost can grow very fast if you roll them over or cannot pay on time.
Problem debt, arrears and collections
Arrears letter / reminder
An arrears letter is a letter from a creditor telling you that you have missed one or more payments and asking you to pay. It may also explain any extra charges or interest and warn what could happen if you do not respond.
Default notice (consumer credit)
A default notice is a formal letter from a creditor under the Consumer Credit Act saying that you have broken the agreement, for example by missing payments, and giving you time to catch up. If you do not act, the account can be “defaulted”, which is recorded on your credit file for six years.
County Court Judgment (CCJ) – England and Wales
A CCJ is a court order saying you must repay a debt, usually in a set way. A CCJ goes on your credit record and can lead to further enforcement action, such as bailiffs or an attachment of earnings, if you do not pay.
Decree – Scotland
A decree is similar to a CCJ but is issued by a Scottish court. It says you owe money and sets out how you should pay; it can also lead to enforcement if you do not pay.
Credit reference agency
A credit reference agency (CRA) is a company that keeps records of credit and some bill payments for individuals and shares them with lenders. In the UK the main CRAs are Experian, Equifax and TransUnion, and you can get a copy of your credit report from them.
Debt collection agency
A debt collection agency is a company that chases unpaid debts on behalf of a creditor or after buying the debt. They can contact you and agree payment plans but they do not have more legal powers than the original creditor.
Bailiff / enforcement agent (England and Wales)
Bailiffs, also called enforcement agents, are people authorised to collect certain debts after a court order, sometimes by taking and selling goods. There are strict rules about when they can visit, what they can take and how they must behave.
Sheriff officer (Scotland)
Sheriff officers are enforcement officers in Scotland who can carry out court orders, for example by taking and selling goods or serving legal papers. They have legal powers but must follow strict procedures and rules.
Attachment of earnings
Attachment of earnings is when a court tells your employer to take money from your wages to pay a debt. The money is sent directly to the creditor, and you will see the deduction on your payslip.
Charging order
A charging order is a court order in England and Wales that secures an unsecured debt, such as a credit card, against your home or other property. This means that when the property is sold, the debt is normally paid out of the sale proceeds.
Statute‑barred debt (limitation period)
Most unsecured debts in England, Wales and Northern Ireland have a time limit, usually six years, for a creditor to start court action. If this time has passed with no payment or written acknowledgement, the debt may become “statute‑barred”, meaning it is very hard for the creditor to enforce it in court.
Formal and informal debt solutions (England and Wales, unless stated)
Debt advice / debt counselling
Debt advice or counselling is free, confidential help from a specialist adviser to understand your debts, your options and how to deal with them. In the UK, well‑known free advice providers include Citizens Advice, National Debtline and StepChange Debt Charity.
Debt management plan (DMP)
A DMP is an informal agreement, usually set up by a charity or company, where you make one affordable monthly payment that is shared between your creditors. Creditors are asked to accept lower payments and may agree to freeze interest and charges, but they do not have to agree.
Administration order (England and Wales)
An administration order is a court order for people with debts under a set limit and at least one unpaid court judgment, allowing them to make a single payment to the court, which is then divided between creditors. While the order is in place, creditors included in it cannot take further action without the court’s permission.
Individual Voluntary Arrangement (IVA)
An IVA is a formal agreement supervised by an insolvency practitioner where you make regular payments towards your debts, usually for five or six years, after which most remaining unsecured debt is written off. Creditors vote on the proposal, and if enough agree it becomes legally binding on all included creditors.
Debt Relief Order (DRO)
A DRO is a low‑cost, formal insolvency option for people on a low income with little or no assets and debts under a set limit. If you qualify, your debts are frozen for twelve months and then written off if your situation has not improved.
Bankruptcy (England, Wales and Northern Ireland)
Bankruptcy is a legal way of dealing with debts you cannot pay, where most of your unsecured debts can be written off but some of your assets may be sold. Bankruptcy normally lasts about one year, but it can seriously affect your credit record and what you can do financially for several years.
Sequestration (Scotland)
Sequestration is the Scottish legal term for bankruptcy. As with bankruptcy elsewhere in the UK, most debts can be written off but your assets and income may be used to pay creditors.
Protected Trust Deed (Scotland)
A Protected Trust Deed is a formal Scottish debt solution where your assets and a set monthly payment go into a “trust” supervised by a trustee to repay part of what you owe over a fixed time, usually four years. At the end, most remaining unsecured debt is written off if you have kept to the terms.
Debt consolidation
Debt consolidation means taking out a new loan or credit to pay off several existing debts, so you have one payment instead of many. This can sometimes reduce monthly payments but can be risky if the new loan is secured on your home or runs for a much longer time.
Equity release
Equity release is a way for older homeowners to take money out of the value of their home, usually through a special loan, while continuing to live there. It can reduce the value of your estate when you die, so independent advice is important before using it.
Debt Respite Scheme (“Breathing Space”) – England and Wales
The Debt Respite Scheme, often called “Breathing Space”, gives people in problem debt temporary legal protection from most creditor action while they get debt advice and put a plan in place. A standard breathing space normally lasts up to sixty days, during which most interest and charges are frozen and creditors should not contact you about included debts.
Mental health crisis breathing space
Mental health crisis breathing space is a special type of breathing space for people receiving crisis mental health treatment. It gives longer protection than standard breathing space, lasting as long as the crisis treatment plus thirty days.
Roles and organisations in debt and insolvency
Insolvency Service
The Insolvency Service is a government agency that oversees formal insolvency procedures such as bankruptcy, DROs and company liquidations. It also employs adjudicators who decide some bankruptcy applications.
Insolvency practitioner (IP)
An insolvency practitioner is a qualified professional, often an accountant or solicitor, who is licensed to manage formal insolvency procedures like IVAs, bankruptcy and liquidations. They act as trustee or supervisor, dealing with assets, creditors and legal requirements.
Trustee in bankruptcy / sequestration
A trustee is the person (often an insolvency practitioner or the Official Receiver) who controls the assets and some income of a bankrupt person or someone in a trust deed, to pay creditors as far as possible. The trustee must follow insolvency law and report on what has been done.
Official Receiver (OR)
The Official Receiver is a civil servant and officer of the court who acts as trustee in many bankruptcy cases at the start and investigates the causes of the insolvency. They may later pass the case to a private insolvency practitioner.
Adjudicator (bankruptcy)
The adjudicator is a government official at the Insolvency Service who looks at bankruptcy applications and decides whether to make a bankruptcy order. The adjudicator is not a judge but has legal powers similar to a court for these decisions.
Debt adviser / money adviser
A debt adviser or money adviser is a trained person who helps you understand your debts, benefits and options and supports you to make a plan. They may work for charities, councils or housing associations and can help you apply for solutions like breathing space, DROs or IVAs.
Citizens Advice
Citizens Advice is a network of independent charities across the UK that give free, confidential and impartial advice on money, debt, benefits, housing, work and other problems. You can usually get help online, by phone or face‑to‑face at a local office.
National Debtline
National Debtline is a charity that provides free debt advice by phone and online to people in England, Wales and Scotland. They also offer factsheets and template letters to help you deal with creditors.
StepChange Debt Charity
StepChange is a large UK debt advice charity that offers free debt advice and can set up solutions such as DMPs, DROs, IVAs and bankruptcy referrals. You can get help online or by phone, and they support people across the UK.
Court and legal terms linked to debt
Court claim / claim form
A court claim form is the document that starts a case in court when a creditor asks for a judgment that you owe money. It explains who is claiming, how much they say you owe and how you can respond.
Judgment creditor and judgment debtor
Once a court has made an order about a debt, the person or company owed money is called the judgment creditor and the person who owes is the judgment debtor. These terms are used in later enforcement steps and paperwork.
Warrant of control / warrant of execution
A warrant of control (previously called a warrant of execution) is a court document in England and Wales that allows bailiffs to visit and take goods to sell towards a debt after a judgment. Bailiffs must give notice before visiting and follow strict rules.
Possession order (housing)
A possession order is a court order that says a landlord or mortgage lender can take back a property, usually because of arrears or another breach of the agreement. In many cases the order is suspended if you keep to an agreed repayment plan.
Repossession
Repossession is when a lender or owner takes back a property or goods, such as a home or car, because you have not kept to a credit agreement. It usually follows court action and can have serious consequences for housing and credit.
