At Moolr we know that sometimes, the financial jargon can be difficult to understand. In this series of blogs, we will explain some of the most common terms so that you can be in the know instead of out in the cold.
This is the rate at which customers are successful in an application for a loan or credit card. Measured in percentages, at least 66% of successful applications must have the advertised rate offered. This is called the typical APR.
If a person is classed as being in adverse credit, it means they have been identified as a potentially high risk of lending, due to previous repayment problems, or reliance on credit. Lenders will use an adverse credit flag to determine whether they’ll lend to that person. It doesn’t mean they automatically won’t obtain credit, but could mean a higher APR if they do. Possible reasons for adverse credit include previous County Court Judgements (CCJ) or defaulting on previous loans.
Annual percentage rate, or, APR, shows the real rate of interest a customer will be paying over a year after fees, charges and admin costs become factored in. A legal requirement of lenders is to display the APR under the consumer credit act.
This fee covers admin costs of setting up a loan. Arrangement fees usually relate to mortgages.
When a borrower fails to keep up with repayments, this results in the account being in arrears. Borrowers have a financial and legal obligation to repay the arrears to a lender, be they institution or private individuals.
Assets are normally analysed when searching for a secured loan, but worthy of a mention here too. An asset is essentially anything you own. With secured loans, for assets worth over a certain amount of money, e.g. vehicles or houses, it is possible to secure that asset against your loan. This means that should you struggle to meet repayments on a regular basis, the lender has the right to cease the asset, in lieu of payment. This is always the last option for defaults.