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Adjustable Rate Loan
Adjustable rate loans have payment changes throughout the loan period based on the rate increases and decreases in the market.
Adverse Credit
A bad credit record, such as CCJ's , repossession orders, IVA's or arrears.
APR
All lenders are required by law to tell you what their APR - Annual Percentage Rate - is before you sign an agreement. The rate quoted on loans and credit cards may be the monthly or annual rate of interest you pay, but the APR figure calculates the total amount of interest that will be paid over the whole term of the loan, so the lower it is the better for the borrower.
Arrears
Failing to make a scheduled payment on your secured loan - If you are unable to make payments on your loan in full, you should contact the lender to avoid having arrears on your credit history.
Bank of England
The Bank of England's Monetary Policy Committee sets the interest rates to achieve the Treasury's inflation target. The BOE is also responsible for the regulation of the banking industry.
Bankruptcy
This is when an individual who cannot pay their debts has been served a Bankruptcy order by a court. The petition can be filed by the individual or by his creditors.
For a first-time Bankruptcy within a 15 year period for debts under £20,000 the procedure is known as a Summary Administration, and you may be discharged after two years. A first-time bankrupt with debts over £20,000 may be discharged after three years.
Base rate
This is the lowest rate at which a lender will charge interest. The Bank of England's Monetary Committee sets the rate. The UK current bank base rate.
Bridging Loan
This is a short-term loan to cover what will eventually be covered by long-term finance. Sometimes a Bridging-loan is required by purchaser of a property who hasn’t yet sold their original house.
Cancellation Period
The Consumer Credit Act provides a period of time after signing a contract during which customers are entitled to cancel their purchase of some financial products, in certain circumstances.
CCJ's
A County Court Judgement is issued for failure to pay an outstanding debt. This will go on file and subsequently affect your credit rating. Bailiffs can be used to enforce payment of CCJs.
Consolidation Loan
Taking out a loan to pay off all of your outstanding debts - Debt consolidation helps pay off multiple credit cards, loans or other bills you may have. It turns a number of annoying bills into one monthly payment and can save you money.
Credit Agreement
A document that lists the responsibilities of the lender and borrower - It is usually a list of terms and conditions for the loan and includes information on the loan amount, APR, repayment information, and the duration of loan. For a fixed rate loan, the interest rate remains the same its entire duration. Your payments do not fluctuate with the market rates and your monthly bill always remains the same.
Credit rating
A points rating used by banks, mortgage companies and other financial institutions that offer loans. An individual or company is assessed for credit worthiness and risk. Your credit report is compiled by credit reference agencies using public records, such as: the electoral roll, court judgments and bankruptcies and also information from other lenders and financial institutions.
If you are declined credit the lender should inform you the main reason for this. If the decision was based upon a bad credit report, you should obtain the name and address of the Credit Reference Agency they used. You have the right to view the information contained in your credit report to make sure it is accurate.
Credit Reference Agency
These are the agencies that compile credit records of consumers and releases the information to companies offering credit terms, such as Equifax or Experian. You are legally entitled to a copy of your Statutory Credit Report by post for a fee of £2 : Equifax, Plc. Credit File Advice Centre PO Box 1140 Bradford BD1 5US or Experian Consumer Help Service, PO Box 8000, Nottingham NG80 7WF
Debt Consolidation
Debt consolidation loans combine all your outstanding debts into one loan in order to obtain more manageable monthly payments. Consolidating can eliminate the high interest charges on credit cards debts.
Debt Management
A Debt Management Plan (DMP) enables you to make reduced repayments to your creditors over a number of years. A debt management company will negotiate the payments with your creditors on your behalf.
Fixed Rate Loan
In fixed rate loans, the interest rate remains the same through the duration of the loan. This means the monthly installments are always the same.
Flexible Loan
The lender gives you a credit limit which allows you to then decide how much you need to borrow, when you want to borrow it, and how much you repay each month. You will probably pay a higher rate of interest than with a regular fixed rate loan. However, the interest with a flexible loan is calculated daily on the outstanding balance, so if you make an over-payment you will immediately reduce the overall amount you pay.
Gross income
Your income before any deductions have been made, particularly tax.
Guarantor
A person who agrees to guarantee the debts of another. If the borrower fails to make his/her payments then the guarantor will be obliged to make those repayments.
Hire Purchase
The buyer pays an initial deposit and takes possession of the goods. After all the instalments are paid over a specified period the ownership passes to the purchaser.
Home Equity Loan
Home equity loans are typically known as a second mortgage. When you need to borrow money an easy way to get it is by using your house as collateral. Home equity means the value that your house is given through a mathematic formula that involves subtracting the unpaid mortgage amount from the market value of the house. Home equity loans are generally quick and easy to get because the loan is based upon your ownership of the house. If you are unable to repay your loan in full, the lender has the right to take the house from your possession to pay off your debt.
Hybrid Loan
This is a combination of fixed and adjustable rate loans that attempts to provide you with the best of both worlds. Initially, the interest rate of the loan is fixed and you have regular monthly payments that do not fluctuate. After a set period of time, the loan becomes adjustable to the interest rates in the market so your payments may be higher or lower.
Interest rate
The percentage rate at which interest is charged on a loan, or paid out on savings. The rate will vary according to the base rate and the type of loan or savings plan.
IVA
An Independant Voluntary Agreement is a formal arrangement between you and your creditors - set up by a licensed insolvency practitioner - whereby you agree to make reduced payments towards the total amount of your debt, in order to pay off a percentage of what you owe.
Liabilities
The debts of a person or company.
Loan
An advance of money from a lender to a borrower over a set period of time. The borrower is obliged to repay the loan, usually monthly, with interest. There are many different loan options suitable for varying circumstances: Secured, Unsecured, Debt Consolidation, Bridging, Flexible, etc
Long-Term Loans:
Long term loans are the type of loans that are held for more than one year or meet maturity after one year. Mortgage loans can extend from 10 to 20 years. These loans are taken up for capital expenditures of the company such as vehicles, purchasing expenses, construction, furnishing, etc. They are also helpful when business needs help when it is in a depressed or declined cycle. Following are the types of loans banks provide in the UK for starting up small businesses:
LTV
Loan to value ratio - It is the ratio of the sum of secured loans compared to the value of the property the loan is secured against.
Payment Protection Insurance
This is a loan insurance guaranteeing that payments will be made on your secured loan even if you are physically unable due to unemployment, accident, injury, illness or death.
Personal Loan
A loan from a lender to a borower for personal use, such as the purchase of a car, holiday, home improvements, etc. A Personal Loan can be Unsecured or Secured.
Secured Loan
This loan is secured on your property by the lender. This ensures the lender is minimising the risk of losing the money, and as a result is able to offer a Secured Loan at a lower APR than an Unsecured Loan. A Secured Loan is also easier to obtain even with a bad credit history, such as arrears or county court judgements.
With secured loans you should be aware that your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.
Short-Term Loans
Short term loans are the type of loans that meet maturity within a year or less or are payable within 12 months. Short-term loans include lines of credit, working capital loans and accounts receivable loans.
Student Loans
Student loans in the UK are publicly financed by the government body - Student Loans Company, and are provided to help students with their living costs whilst studying in higher education.
SVR
The Standard Variable Rate is the interest rate the lender charges which fluctuates with the changes in the base rate – this affects your interest payments accordingly.
Unsecured Loan
An Unsecured Loan costs more in repayments than a Secured Loan, but does not carry the risks to your home if you unable to keep up repayments.
Variable Rate Loan
A loan with interest rate changes tied to the market rate - You benefit from lower monthly payments when the market rate is down, but the rates can go up and your payments can increase.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER DEBT SECURED ON IT.
