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credit policy

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Definition of credit policy

Credit Policy Image 1

credit policy

Standards set to determine the amount and nature of credit to extend to customers.



Related Terms:

Insurance Policy (Credit Insurance)

A policy under which the insurance company promises to pay a benefit of the person who is insured.


Accidental Dismemberment: (Credit Insurance)

Provides additional financial security should an insured person be dismembered or lose the use of a limb as the result of an accident.


Accomodating Policy

A monetary policy of matching wage and price increases with money supply increases so that the real money supply does not fall and push the economy into recession.


Amortization (Credit Insurance)

Refers to the reduction of debt by regular payments of interest and principal in order to pay off a loan by maturity.


Beggar-My-Neighbor Policy

A policy designed to increase an economy's prosperity at the expense of another country's prosperity.



Beneficiary (Credit Insurance)

The person or party designated to receive proceeds entitled by a benefit. Payment of a benefit is triggered by an event. In the case of credit insurance, the beneficiary will always be the creditor.


Best-interests-of-creditors test

The requirement that a claim holder voting against a plan of reorganization
must receive at least as much as he would have if the debtor were liquidated.


Credit Policy Image 2

Borrower (Credit Insurance)

A consumer who borrows money from a lender.


Cold-Turkey Policy

Decreasing inflation by immediately decreasing the money growth rate to a new, low rate. Contrast with gradualism.


Collection policy

Procedures followed by a firm in attempting to collect accounts receivables.


collection policy

Procedures to collect and monitor receivables.


Commercial Business Loan (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for business purposes.


Comparative credit analysis

A method of analysis in which a firm is compared to others that have a desired
target debt rating in order to infer an appropriate financial ratio target.


Consumer credit

credit granted by a firm to consumers for the purchase of goods or services. Also called
retail credit.


Consumer Credit Protection Act

A federal Act specifying the proportion of
total pay that may be garnished.


Credit

Money loaned.


Credit Policy Image 3

Credit

Buying or selling goods or services now with the intention of payment following at some time in
the future (as opposed to buying or selling goods or services for cash).


Credit

One side of a journal entry, usually depicted as the right side.



Credit

A rating of a company's credit (ability to payback debt), usually by a third party credit agency.


credit

On your bank statement, 'credit' represents funds that you have deposited into your account. The opposite of a credit is a debit.
However, ‘credit’ also means money that you borrow from a financial lender, like a bank. A credit card, for example, is a card that allows you to access funds which you then have to repay.


Credit analysis

The process of analyzing information on companies and bond issues in order to estimate the
ability of the issuer to live up to its future contractual obligations. Related: default risk


credit analysis

Procedure to determine the likelihood a customer will pay its bills.


credit bureau

An organization that provides financial institutions with credit information concerning existing or potential customers who are looking to obtain credit services.


credit card

A revolving source of credit with a pre-established limit. You have to pay interest on a credit card if you have an outstanding balance.


Credit Crunch

A decline in the ability or willingness of banks to lend.


Credit enhancement

Purchase of the financial guarantee of a large insurance company to raise funds.


Credit Loss

A loan receivable that has proven uncollectible and is written off.


credit memo

A record of the funds which have been credited to your account.



Credit period

The length of time for which the customer is granted credit.


Credit Rationing

Restriction of loans by lenders so that not all borrowers willing to pay the current interest rate are able to obtain loans.


Credit risk

The risk that an issuer of debt securities or a borrower may default on his obligations, or that the
payment may not be made on a negotiable instrument. Related: Default risk


Credit Risk

Financial and moral risk that an obligation will not be paid and a loss will result.


Credit scoring

A statistical technique wherein several financial characteristics are combined to form a single
score to represent a customer's creditworthiness.


Credit spread

Related:Quality spread


Credit Terms

Conditions under which credit is extended by a lender to a borrower.


Credit Union

credit unions are community based financial co-operatives and most offer a full range of services. All are owned and controlled by members who are also shareholders. credit unions are regulated provincially and insured by a stabilization fund, deposit insurance or guarantee corporation.
credit unions are supported by a system of provincial credit union Centrals, a national credit union Central and affiliated national financial co-operatives.


Crediting rate

The interest rate offered on an investment type insurance policy.


Creditor

Lender of money.


Creditor

Person or business that is owed money.


Creditor (Credit Insurance)

A lender or lending institution that offers financing and loans to a borrower, for the purpose of acquiring a commodity.


Creditor Proof Protection

The creditor proof status of such things as life insurance, non-registered life insurance investments, life insurance RRSPs and life insurance RRIFs make these attractive products for high net worth individuals, professionals and business owners who may have creditor concerns. Under most circumstances the creditor proof rules of the different provincial insurance acts take priority over the federal bankruptcy rules.
The provincial insurance acts protect life insurance products which have a family class beneficiary. Family class beneficiaries include the spouse, parent, child or grandchild of the life insured, except in Quebec, where creditor protection rules apply to spouse, ascendants and descendants of the insured. Investments sold by other financial institutions do not offer the same security should the holder go bankrupt. There are also circumstances under which the creditor proof protections do not hold for life insurance products. Federal bankruptcy law disallows the protection for any transfers made within one year of bankruptcy. In addition, should it be found that a person shifted money to an insurance company fund in bad faith for the specific purpose of avoiding creditors, these funds will not be creditor proof.


Creditors

Purchases of goods or services from suppliers on credit to whom the debt is not yet paid. Or a
term used in the Balance Sheet to denote current liabilities.


Critical Illness Insurance (Credit Insurance)

Coverage that provides a lump-sum payment should you become seriously ill with a specified illness. The payment is made to your creditors to pay off your debt owing.


Debt (Credit Insurance)

Money, goods or services that someone is obligated to pay someone else in accordance with an expressed or implied agreement. Debt may or may not be secured.


Delivery policy

A company’s stated goal for how soon a customer order will be
shipped following receipt of that order.


Demand line of credit

A bank line of credit that enables a customer to borrow on a daily or on-demand basis.


Demand Management Policy

Fiscal or monetary policy designed to influence aggregate demand for goods and services.


Disability Insurance (Credit Insurance)

Group Insurance designed to cover monthly obligations due to a borrower being unable to work due to sickness or injury.


Discretionary Policy

A policy that is a conscious, considered response to each situation as it arises. Contrast with policy rule.


Dividend policy

An established guide for the firm to determine the amount of money it will pay as dividends.


Dividend Policy

This policy governs Canada Life's actions regarding distribution of dividends to policyholders. It's goal is to achieve a dividend distribution that is equitable and timely, and which gives full recognition of the need to ensure the ongoing solidity of the company. It also specifies that distribution to individual policyholders must be equitable between dividend classes and policyholder generations, and among policyholders within any class.


Eurocredits

Intermediate-term loans of Eurocurrencies made by banking syndicates to corporate and
government borrowers.


Evergreen credit

Revolving credit without maturity.


Export Credit Insurance

The granting of insurance to cover the commercial and political risks of selling in foreign markets.


Federal credit agencies

Agencies of the federal government set up to supply credit to various classes of
institutions and individuals, e.g. S&Ls, small business firms, students, farmers, and exporters.


Fiscal policy

The use of government spending and taxing for the specific purpose of stabilizing the economy.


Fiscal Policy

A change in government spending or taxing, designed to influence economic activity.


Five Cs of credit

Five characteristics that are used to form a judgement about a customer's creditworthiness:
character, capacity, capital, collateral, and conditions.


Foreign tax credit

Home country credit against domestic income tax for foreign taxes paid on foreign
derived earnings.


Formalized Line of Credit

A contractual commitment to make loans to a particular borrower up to a specified maximum during a specified period, usually one year.


Full Credit Period

The period of trade credit given by a supplier to its customer.


Full faith-and-credit obligations

The security pledges for larger municipal bond issuers, such as states and
large cities which have diverse funding sources.


Incomes Policy

A policy designed to lower inflation without reducing aggregate demand. Wage/price controls are an example.


Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).


Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.


Job Loss Insurance (Credit Insurance)

Coverage that can pay down your debt should you become involuntarily unemployed. The payment is made to your creditors to reduce your debt owing.


Joint Policy Life

One insurance policy that covers two lives, and generally provides for payment at the time of the first insured's death. It could also be structured to pay on second death basis for estate planning purposes.


Lease (Credit Insurance)

Contract granting use of real estate, equipment or other fixed assets for a specified period of time in exchange for payment. The owner or a leased property is the lessor and the user the lessee.


Lender (Credit Insurance)

Individual or firm that extends money to a borrower with the expectation of being repaid, usually with interest. Lenders create debt in the form of loans. Lenders include financial institutions, leasing companies government lending agencies and automobile dealers.


Lending Policy

A course of action adopted by a financial institution to guide and usually determine present and future decisions in the light of given conditions.


Letter of credit (L/C)

A form of guarantee of payment issued by a bank used to guarantee the payment of
interest and repayment of principal on bond issues.


Letters of Credit

A letter of credit is a guarantee of payment by a bank (issuing institution)to a third party for a specific amount of money, if certain conditions are met.


Life Insurance (Credit Insurance)

Group Term life insurance that pays or reduces the balance due on a loan if the borrower dies before the loan is repaid.


Line of credit

An informal arrangement between a bank and a customer establishing a maximum loan
balance that the bank will permit the borrower to maintain.


Line of credit

An informal arrangement between a bank and a customer establishing a maximum loan
balance that the bank will permit the borrower to maintain.


line of credit

Agreement by a bank that a company may borrow at any time up to an established limit.


Line of Credit

An agreement negotiated between a borrower and a lender which establishes the maximum amount against which a borrower may draw. The agreement also sets out other conditions, such as how and when money borrowed against the line of credit is to be repaid.


line of credit

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a line of credit permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.


Monetary policy

Actions taken by the Board of Governors of the Federal Reserve System to influence the
money supply or interest rates.


Monetary Policy

Actions taken by the central bank to change the supply of money and the interest rate and thereby affect economic activity.


Mortgage (Credit Insurance)

An agreement between a creditor and a borrower, where the creditor has loaned an amount to the borrower for purposes of purchasing a loan secured by a home.


Mortgage Life insurance (Credit Insurance)

Decreasing term life insurance that provides a death benefit amount corresponding to the decreasing amount owed on a mortgage.


Non-participating Policy

A type of insurance policy or annuity in which the owner does not receive dividends.


Operating Line of Credit

A bank's commitment to make loans to a particular borrower up to a specified maximum for a specified period, usually one year.


Participating Policy

A policy offers the potential of sharing in the success of an insurance company through the receipt of dividends.


Perfect market view (of dividend policy)

Analysis of a decision on dividend policy, in a perfect capital
market environment, that shows the irrelevance of dividend policy in a perfect capital market.


Personal Line of credit (Credit Insurance)

A bank's commitment to make loans to a borrower up to a specified maximum during a specific period, usually one year.


personal line of credit (PLC)

A revolving source of credit with a pre-established limit. You access the funds only as you need them, and any amount that you pay back becomes accessible to you again. Unlike a personal loan, a PLC permits you to write cheques and make bank machine withdrawals, and requires you to pay interest only on the funds that you actually use.


Policy

A written document that serves as evidence of insurance coverage and contains pertinent information about the benefits, coverage and owner, as well as its associated directives and obligations.


Policy Acquisition Costs

Costs incurred by insurance companies in signing new policies, including expenditures on commissions and other selling expenses, promotion expenses, premium
taxes, and certain underwriting expenses. Refer also to customer, member, or subscriber
acquisition costs.


Policy Anniversary

Yearly event linked to a policy. Usually the date issued.


Policy asset allocation

A long-term asset allocation method, in which the investor seeks to assess an
appropriate long-term "normal" asset mix that represents an ideal blend of controlled risk and enhanced
return.


Policy Date

Date on which the insurance company assumes responsibilities for the obligations outlined in a policy.


Policy Fee

This is an administrative fee which is part of most life insurance policies. It ranges from about $40 to as much as $100 per year per policy. It is not a separate fee. It is incorporated in the regular monthly, quarterly, semi-annual or annual payment that you make for your policy. Knowing about this hidden fee is important because some insurance companies offer a policy fee discount on additional policies purchased under certain conditions. Sometimes they reduce the policy fee or waive it altogether on one or more additional policies purchased at the same time and billed to the same address. The rules are slightly different depending on the insurance company. There could be enormous savings if several people in the same family or business were intending to purchase coverage at the same time.


Policy Fee

Administrative charge included in a policy Premium.


Policy-Ineffectiveness Proposition

Theory that anticipated policy has no effect on output.


Policy Rule

A formula for determining policy. Contrast with discretionary policy.


Policy Year

Period between two policy anniversaries.


Policyholder

This is the person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership or a corporation. There are instances in marriage breakup (or relationship breakup with dependent children) where appropriate life insurance on the support provider, owned and paid for by the ex-spouse receiving the support is an acceptable method of ensuring future security.



 

 

 

 

 

 

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