This is the percentage of customers who lenders accept for a loan or credit card. Of those the lenders approve, they must offer the advertised rate to at least two thirds, known as the “typical APR”.
This is a rate that changes periodically, as it is usually linked to a specific index or a base rate. Payments thus change with time, going up and down. Some refer to it as a variable or floating rate.
Annual percentage rate (APR)
The APR refers to the real rate paid by a borrower over a year, including all fees and costs. The law requires it to be quoted by all lenders in their literature and on websites, under the terms of the Consumer Credit Act.
Essentially an administration cost, it refers to a charge for a lender setting up a loan, and is most usually applied on mortgages.
Basically a failure to keep up with repayments, meaning you will thus be in “arrears”. The borrower will still be legally obliged to pay off arrears, and lenders may subject them to extra charges for falling behind with payments. Also known as a default.
When someone does not have a good credit rating, thus restricting their ability to take out loans or other financial products. There are numerous reasons for a poor rating, but contributory factors can be missing payments in the past or not being on the electoral roll.
A common term used when numerous debts are “consolidated” into one easy to manage loan.
County court judgment (CCJ)
A CCJ is a judgment issued by a county court to an individual or company who have not paid off an outstanding debt. What’s more, an unsettled CCJ will badly affect a person’s credit rating. It will thus limit the ability to gain credit. If a borrower settles payment within 30 days of a judgment date, it will not be listed on a credit register.
The process of borrowing money from a lender, or more generally receiving services or goods up-front, with payment to follow. There will usually be interest charges. A loan would come under this criteria.
A report containing all the relevant information that contributes to a person’s credit “rating”. you usually obtain details from one of the three main reference agencies: Experian, Equifax and Callcredit.
Lenders will use these reports when deciding on whether to accept applications for finance (a credit search). You can usually get a free credit report from the above companies. This usually comes in the form of a limited-period free trial. For more details click the following link, on the factors that contribute towards a credit card rating, or here to see credit and finance myths debunked.
A card often linked to a person’s bank account, that allows you to withdraw money and make purchases in-store and online.
A common practice, this is where multiple debts are “consolidated” into one easy-to-manage debt, allowing for simpler repayments. This can be done multiple ways, for example by taking out a loan or transferring balances to a single credit card.
A person “defaults” when he fails to keep up with repayments on any financial product. Like CCJs, defaulting on payments will negatively affect your credit rating, and will stay on your file for many years. Can also be referred to as arrears.
The transfer of funds direct into an individual’s bank account, allowing an efficient and speedy deposit.
Early redemption charge/fee
This is a charge payable by a borrower if deciding (on some financial products) to pay off an outstanding balance ahead of schedule. Thus whilst this may always seem like a good idea, you should always check the terms and conditions on a product before proceeding with such a step.
The value of a property once any debts secured against it have been repaid. What is left is the property’s equity.
An agreement with a lender to extend the loan period, which may incur extra charges.The lender will inform you of any changes to your terms and conditions.
The Financial Conduct Authority, a financial watchdog that was formed to deal with many of the old functions of the Bank of England. It has brought through sweeping changes recently to the payday loan industry, and is now focusing attention on credit card companies and saving accounts.
Interest that stays at a set rate throughout its term.
A person’s income before taxes have been deducted.
An individual; usually a homeowner, whom agrees to cover a borrower’s loan repayments, should they become unable to meet the agreed repayment terms.
A type of secured loan, this money is secured against the borrower’s property. Thus it is always important to keep up with payments.
Any company that lends money/provides credit.
The length of time that a borrower repays a loan over. This can be anything from just a few days (typically with a payday loan) to a number of years.
The amount a borrower pays off a loan on a monthly basis.
A person’s income after all taxes have been deducted – essentially an individual’s “take-home” pay.
This type of loan can also be referred to as a short-term loan, or a cash advance, though that term is more common in the United States. As the name suggests, it is a loan provided to a borrower to help with costs between paydays. The person who took out the loan usually repays the amount when he or she next receives a pay packet.
Basically a loan for an individual, as opposed to a business for example. It tends to refer to more traditional types of loans, those of at least a two-year period.
The criteria by which an individual or business can apply for credit. Their criteria will vary from lender to lender and from product to product, but the general criteria for individuals is to be 18+ years of age, a UK resident, and in employment. Extra conditions will usually apply.
An agreement detailing how, and over what time period, a borrower will repay a loan.
Another term to describe extending a loan. Rolling over a loan can, and probably will, attract extra costs, and was part of the criticism in recent years of payday loans, as borrowers could end up paying back large amounts on loans if they struggled to make repayments as per the original agreement.
See ‘homeowner’ loan – a loan that is secured against an asset, usually a property.
Total amount repayable
The total amount of a loan plus all interest and fees.
This is the interest rate that lenders will advertise alongside financial products. When people apply for a loan (to name one example), lenders will not offer every successful applicant the same interest rate. The rate offered may vary due to their credit rating and personal details. To give potential borrowers an idea of what rates a lender charges, they will display a typical APR, and this is the rate that at least 66% of successful applicants must be subject to.
Not covered by the Financial Conduct Authority.
A loan provided to an individual or organisation that is not “secured” against a key asset (such as a property or motor vehicle).
An interest rate that can go up or down during the repayment term. This rate is often linked to an index.