Glossary
Wage garnishment
A court- or agency-ordered deduction taken directly from your paycheck to repay a debt — the end stage of an unresolved default.
Wage garnishment lets a creditor collect a debt by having your employer withhold part of your paycheck directly, after winning a court judgment (for most debts) or, for federal student loans and taxes, without needing one first. Federal law caps how much of your disposable income can be garnished, and some income (Social Security, certain benefits) is generally protected. It represents the far end of the collections process — reaching a payment arrangement, disputing the debt, or negotiating a settlement earlier almost always beats letting a case reach this stage.
Related terms
- Balloon payment A large lump sum due at the end of a loan term, after years of smaller payments that didn't fully pay off the balance.
- Secured A loan backed by an asset the lender can seize if you default — a house, a car, or a deposit.
- Escrow A holding account your servicer uses to collect and pay property taxes and insurance alongside your mortgage payment.
- Secured credit card A credit card backed by a cash deposit you make upfront — the deposit becomes your credit limit, and it is the standard tool for rebuilding credit.
- Lien A legal claim against property that secures a debt — the lienholder can force a sale to collect if the debt goes unpaid.
- APR Annual percentage rate — the interest rate plus mandatory fees, expressed as one yearly cost. The only honest way to compare two loan offers.