Debt Cancellation Contract

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DEFINITION of 'Debt Cancellation Contract'

A contract in which a bank agrees to cancel all or part of a customer's obligation to repay a loan due to an event such as death, disability or involuntary loss of employment. A debt cancellation contract is an alternative to a life insurance plan.

BREAKING DOWN 'Debt Cancellation Contract'

Debt cancellation contracts are a product that banks offer in lieu of credit insurance plans for credit cards and other forms of bank credit. Instead of credit insurance premiums, the customer pays the bank a fee.

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RELATED FAQS
  1. How can I take a loan from my 401(k)?

    The majority of employers offer eligible employees the opportunity to save for retirement in a qualified plan through paycheck ... Read Full Answer >>
  2. How does a bank determine what my discretionary income is when making a loan decision?

    Discretionary income is the money left over from your gross income each month after taking out taxes and paying for necessities. ... Read Full Answer >>
  3. What is the difference between "closed end credit" and a "line of credit?"

    Depending on the need, an individual or business may take out a form of credit that is either open- or closed-ended. While ... Read Full Answer >>
  4. What is the best way to start to rebuild your credit after a bankruptcy?

    Bankruptcies can be devastating to your credit score. Even worse, a bankruptcy will be listed on your credit report for between ... Read Full Answer >>
  5. What is the difference between a possessory and a non-possessory lien?

  6. Why is more interest paid over the life of a loan when it is capitalized?

    More interest is paid over the life of a loan when that interest is capitalized because the capitalized interest is added ... Read Full Answer >>

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