A good place to start a finance glossary. This is the percentage of customers who are successful in their application for a loan, credit card or any financial product. At least 66% of successful applications have to be offered the advertised rate, known as the typical APR (see Typical APR).For the others accepted for credit, the rate will be dependent on numerous factors, such as credit rating, so the rate could be higher or lower than the typical APR.
The APR indicates the real rate of interest payable over the course of a year once fees, charges and administration costs are factored in. Consumers compare deals more easily. They discover what rates to pay in a straightforward manner. Thus, they budget accordingly. Lenders are legally required to display the APR under the terms of the Consumer Credit Act. Check APRs when looking at loans. Compare rates across the market and choose the deal best for you. Moolr offer advice on this site on this and a range of other topics.
Usually associated with mortgages, this fee covers the administration costs of setting up a loan. Arrangement fees vary significantly and you could be charged up to £2,000, although the average is about £1,000. Setting up a loan does come with additional fees in some instances.
Borrowers choose how they pay this fee with some lenders. Pay the fee upfront, or add a fee to a mortgage, to name two methods.The latter will cost more as you will pay interest charges on it.
Arrears are the result of failing to keep up with repayments, be it a short term loan, mortgage or credit card. Fail to keep up with the arranged repayments and you will be in arrears. Any borrower has a legal obligation to repay arrears to a lender, be it an organisation or an individual. Budget when considering a loan. Choose terms that allow you to make repayments comfortably.
Miss many payments on previous credit, or have many forms of credit and a poor payment history and bad credit may be the result. This will be recorded on an individual’s credit report. Bad credit reduces the ability to get further credit. The best way to repair a bad credit rating is to make regular repayments on your borrowings.
Someone who borrows money from an individual or organisation, be it a payday loan, low-interest loan, or even a mortgage.
A personal loan that is used to buy a car. Use it if other options are not available.
The CCA is a representative for most businesses in the credit industry, and an important point of contact for government, local authorities, financial bodies and for the media and many consumer groups. Members sign a constitution. They also sign a code of practice and a business conduct pledge. Find out more on the website at http://www.ccauk.org/ . Visit the site and see how they help others with financial matters.
A county court judgment. Issued by a County Court to a person who fails to pay an outstanding debt. This is one method that an individual or company may take to try and recoup that debt. Having an unsettled county court judgment against you will damage your credit rating and could thus result in being refused future credit. Details of a CCJ remain on a person’s credit report for seven years. However, if the debt is fully settled within 30 days of a county court judgment, it will not be listed on the credit register. Ensure you deal with any repayment problems head-on. Check your credit rating regularly for mistakes. Avoid getting a CCJ, as it will hamper you financially.
A cash advance, or cash advance loan, to give it its full title, is an alternative name for a payday loan. A method of gaining money in a short space of time (usually the same day, so can also be named a same day loan), to cover unexpected costs. Get a cash advance only if you are confident in repaying the amount in full within a short space of time.
A small, short term loan intended to cover one-off financial mishaps. Essentially the same as the previous entry.
A (debt) consolidation loan is a loan designed to pay off other debts, and thus consolidate debts into this one loan, making the person’s debts easier to administer, and providing peace of mind, compared to the common headache of juggling multiple debts each month, and often incurring extra charges as a result. Research such an option thoroughly. Proceed only if you are confident this method reduces monthly payments.
The Consumer Credit Act 1974 is the legislation that controls the terms and conditions that must be adhered to by providers of financial products. The act therefore dictates that lenders display all the relevant information to borrowers such as the terms of an agreement, APRs and so on. It also allows for a cancellation period after credit is taken out.
A method of obtaining money, goods, or a service up-front, with the promise to repay in the future. Usually results in interest charges. Thus, a short term loan is a form of credit.
Details of our past borrowing trends – most notably the number of full and on-time repayments we have made. Recorded on a credit report, and affects our ability to borrow.
A reference made by credit organisations to record an individual’s credit history. Affects our ability to borrow in the future, depending on the timeliness of our past repayments. Everyone has a legal right to access their credit report, and it is a good idea to regularly check your credit rating in case there are mistakes on the report.
An organisation set up to store details of your credit history. A credit report is created to indicate to a creditor your past repayments, in order to rate your credit-worthiness. Check your report regularly in case there are mistakes. Challenge anything you consider inaccurate. Seek our free trials on credit reports too to save yourself some money.
When you apply for a traditional loan, a lender will run a credit search to obtain information about your credit report, in order to determine whether they can lend to you. Some, but not all payday loan lenders adopt a credit search. Your resulting score, or rating, will determine whether the particular lender will supply you with a short term loan, cash advance or same day loan. Lenders look for those they feel are trustworthy. Making regular repayments is what they expect from borrowers.
Data Protection Act
A law protecting an individual’s personal information and how it is handled by any organisation. Because of this act, lenders are not allowed to pass an individual’s details onto anyone without the permission of the individual. The Act was passed in 1998.
A card linked to a bank account used as a method to take payments. Money is taken immediately, so funds are required to be in the bank account.
A situation where a borrower fails to meet the repayment terms on a loan, or other form of credit. Thus the borrower would be in arrears, having “defaulted” on the terms of the finance agreement.
Term used to describe the automatic transfer of an online payday loan or any type of credit into the borrower’s bank account. This allows the quick transfer of funds to the borrower, often on the same day the application for credit was approved. Check your account to ensure payments have been made. Contact the relevant department if not to ensure no hold-ups.
An uncommon type of personal loan that is unsecured and is, as the name suggests, delivered by an agent – quite literally to your doorstep. These types of loans tend to be for relatively small amounts of money. Typical interest rates tend to be higher than for many other types of loans or credit cards. Repayments are also made via house visits.
An additional charge applied by lenders if a borrower “redeems” a loan or mortgage or any type of credit within a certain period of time. Not all credit agreements will have such a charge, so it is always recommended to check your terms and conditions if you are thinking of paying off any form of credit ahead of schedule. Pay off balances if terms allow it without penalties.
Equity refers to the value of any property once the debts secured against it have been paid. Thus, it’s the amount a person would receive if they sold their house after the outstanding mortgage payments and any secure loans have been paid. It is possible to have negative equity on a house, as many have discovered in recent years.
A loan whereby the funds show in the borrower’s bank account very quickly, usually the same day. Borrowers may recognise this term. These are often associated with short term or payday loans, where money is often required quickly, to cover one-off financial problems. Lenders refer to them by other terms too. They call them same day loans, quick loans or instant payday loans. Ignore these terms, as they tell you little. Simply ensure you are happy with the terms of a loan, whatever its name.
A way of transferring funds between accounts quickly and efficiently; particularly useful for urgent or out-of-hours situations.
A set rate of interest that cannot fluctuate – this allows for easier budgeting, as repayments are consistent.
The income of an individual before taxes are deducted. See net income for what you get after tax. Looking at gross can be misleading, as it is not what you will actually receive! Look at what you get in your bank account to budget accordingly.
A type of secured loan, a homeowner loan is available only to individuals who own their own home. The value of the debt will be secured against the property, so it is important to keep up with payments.
An application made by more than one person, for example a husband and wife.
Offer money to people? Then you are a lender! Lenders offer a wide range of financial products to potential borrowers. One of a bank’s functions is to act as a lender.
Legal responsibility to repay outstanding debts to others. The amount you owe is your liability.
The length of time that you choose to pay your loan over. Payday loans tend to have a term of under 30 days, as do the similar cash advance or same day loans, though the latter, along with short term loans can be up to a few months in term length. Long term loans can be spread out over many years.
If you take out a loan that is longer than a month, so not a payday loan, you will likely make more than one repayment – and the same goes for scheduled payments for any form of finance, be it a credit card or mortgage. In the vast majority of cases, when taking out finance you will make monthly repayments.
The income of an individual, once appropriate taxes have been deducted.
A particular type of payday loan where applicant does not have a credit check performed on them prior to the lender deciding whether to authorise the application. The criteria is based on your income and the loan value.
The proportion of an income that is spent by an individual or family unit/household, often measured on a monthly basis.
A short term cash advance, re-payable on your next pay day. The maximum period of time you can take out a payday loan is 31 days, though some companies do offer rollovers or extended terms. If you take out longer term loans, they would not come under this criteria.
Insurance to cover loan, mortgage or credit card repayments in the event of you being unable to work due to redundancy, ill health or an accident. Such insurance has made the headlines in recent years due to the allegation that many lenders mis-sold the insurance to borrowers. Put in a claim before the deadline approached in 2018.
The eligibility requirements demanded by the lender. Criteria set out generally is as follows: being a permanent resident of the UK, over the age of 18 and in receipt of regular income. However, many providers will attach additional lending conditions.Qualifying criteria – The eligibility requirements demanded by the lender. Standard criteria required in order to qualify for a loan include being a permanent resident of the UK, over the age of 18 and in receipt of regular income. However, many providers will attach additional lending conditions.
Financial products that are covered by the Financial Services Authority. Providers must adhere to a code of conduct. Consumers protect themselves via the Financial Services Compensation Scheme. Consumers can seek recourse for any problems relating to their product through the Financial Ombudsman Service. Seek help from these channels if necessary.
An agreement detailing how, and over what time period, a borrower will repay a loan. Proceed with a loan only after checking this schedule. Search the market for better deals if te schedule does not suit your needs. Use a broker such as Moolr who can collate the best deals on the market.
A small valued loan (usually up to £1000) whereby in most cases you receive the money the same day. Repayment normally takes place when you next get paid, so they are often termed pay day loans as well, though they aren’t always the same product.
A loan, in addition to a mortgage, that is secured against the borrower’s property.
A loan that is secured means a loan that has some item of the borrower’s collateral tied to it, so the borrower’s asset listed on the secured loan will be at risk if payments are missed. The collateral helps many obtain a loan that they would struggle to get elsewhere. However, this puts the asset(s) secured against the loan at risk, so it is important to keep up with repayments.
A loan with a repayment period of between 1 and 6 months. Ignore names and concentrate on terms. Pick the loan that suits your repayment period budget and research so that you are comfortable in making those repayments.
The amount of the original loan plus all interest and fees.
A loan that is unsecured means a loan that does not need collateral tied to it, so the borrower’s existing assets will not be at risk. The majority of small and/or short-term loans will be unsecured, personal loans being the most popular category.
Not covered by the Financial Services Authority (FSA). Look for companies that are, for extra security. Use those that you trust and always check your terms of borrowing thoroughly.
Indicates that the APR on a loan may change during the period of repayment, so is not a fixed rate loan. Check your terms on a loan in all cases. Ensure you are aware of what your monthly repayments are. Check if they change at any point, as this will impact your budgeting. Seek lenders that offer foxed rates if this helps you budget easier.
A loan designed to help out with a couple’s special day. Pay for the whole ceremony, or perhaps for one particular part of the many expenses that the couple are struggling to cover the costs for. Using finance to cover flowers for example could help take the strain off the big day.