|
You can use our glossary
to find the definitions of many terms you will come
across when arranging a unsecured personal loan
Click on a letter A
to Z for terms beginning with that letter
A
Acceleration clause
A provision that gives the lender the
right to collect the balance of a loan if a borrower
misses a payment.
Accident, sickness and unemployment
insurance
incorporating cover
for loss of earnings arising from accident, sickness
or unemployment. Usually paid out in the form of a monthly
tax-free income to cover a portion of lost earnings
and restricted to two years from the date of the first
payment.
Addendum
An addition or change to a .
Additional principal payment
Extra money included in the monthly
payment to help reduce the
and shorten the of the loan.
Add-on interest
The interest a borrower pays on the
for the duration of the loan.
Adjustment date
This is the date on which the interest
rate changes for a variable rate mortgage.
Affiant
A person who makes a sworn statement.
Alienation clause
A provision that requires the borrower
to pay the balance of the loan in a lump sum after the
property is sold or transferred.
Annual Percentage Rate
This is an indicator used to compare
interest rates. It takes into account the costs involved
in setting up the mortgage, any , how
often interest is calculated and calculates what the
average rate of interest will be over the life of the
loan. All lenders that comply with the must ensure that the the borrower is informed of
the APR.
Application
A document detailing a potential borrower's
income, debt and other obligations to determine credit
worthiness.
Application fee
The fee a lender charges to process
a .
Applied or nominal interest rate
The rate used to calculate the interest
due.
Appointed representative
Salesperson, company or organisation
that advises on the investment products specific to
one life assurance or investment company.
APR
See Annual Percentage Rate
Arrears
Arrears occur when the borrower misses
one or a series of monthly payments. Arrears can lead
to the of the property.
Arrears fee
This is charged on a monthly basis
to cover additional administrative costs where your
loan account is one or more monthly payments in arrears.
ASU
See
B
Bailiff
An official representative of the courts,
who may call round to your possessions or
house if you cannot keep up on your mortgage repayments
and fail to reach an agreement with your lender to ammend
your repayments.
Balance outstanding
The amount of loan owed at one time.
Balloon loan
A in which monthly installments
are not large enough to repay the loan by the end of
the . As a result, the final payment due is the
lump sum of the remaining .
Balloon payment
The final lump sum payment due at the
end of a balloon loan.
Bank of England base rate
The prevailing rate of interest set
by the Bank of England which all lenders generally follow.
Bankruptcy
A proceeding in which an insolvent
debtor can obtain relief from payment of certain obligations.
Bankruptcies remain on a for seven years
and can severely limit a person's ability to borrow.
Basis point
A basis point is one one-hundredth
of one percentage point. For example, the difference
between a loan at 8.25 percent and a mortgage at 8.37
percent is 12 basis points.
BBA - British Bankers Association
This is the trade organisation of the
banks.
Before-tax income
Total income before taxes are deducted.
Benefit period
A time period over which the interest
rate of a loan is ,
or , for example.
Biweekly loan
A loan that requires payments every
two weeks and helps repay the loan over a shorter term.
Breach of contract
The failure to perform provisions of
a contract without a legal excuse.
Breach of covenant
The failure to obey a legal agreement.
Breach of warranty
A seller's inability to pass clear
to a buyer.
Bridging loan
This is a short term loan provided
by a bank or which covers you if you
need to pay for your next home, while still waiting
for the money to come through from the sale of your
current home. If you do require one of these, you must
ensure that the funds to repay the loan will be in place
when the loan period expires.
Broker
Brokers and other intermediaries attempt
to arrange suitable financial products or policies for
you. They can be fully independent, part of a network
that uses a panel of providers, or tied to certain institutions
in which case they can only sell their products.
Brokerage
The act of bringing together two or
more parties in exchange for a fee or commission.
BSA - Building Societies Association
This is the trade organisation of the
building societies.
Building society
Building societies are mutually owned
organisations, which exist not for profit but for the
benefit of the members. The idea of this is that the
society is able to offer cheaper products to its members,
though this is not always the case.
Buildings and contents insurance
Buildings and contents insurance can
often be purchased together protecting both the building
structure and your belongings and possessions inside.
Buildings insurance
Buildings insurance is designed to
give you financial protection for the basic structure
of your home, such as the walls, roof and foundations.
This usually includes any external parts of the property
such as your shed, garage, conservatory or greenhouse.
C
Call option
A clause in a loan agreement that allows
a lender to ask for the at any time.
Cancellation clause
A clause that details the conditions
under which each party may terminate the agreement.
Cap
A limit on the amount the interest
rate or monthly payment can increase in an variable
rate loan.
Capital
In the context of loans, capital describes
the original sum borrowed as distinct from interest
required on that loan.
CAT standard
These are a set of standards proposed
by the government aimed at ensuring a certain level
of standard amongst financial products such as and .
Whilst they are a sign that a lender or provider
is a reputable business and offers products that are
of a certain quality, a CAT mark does nott ensure that
a product is the most suitable one for you.
Caveat
A formal notice, that asks a court
to suspend action until the party which filed the challenge
can be heard.
Caveat emptor
A legal principle derived from Latin
than means "let the buyer beware."
CCJ - County Court Judgement
Whenever someone fails to pay for something
and is subsequently taken to court, the magistrate may
issue a County Court Judgement against that individual
to pay the outstanding debt. This may well affect your
ability to raise finances in the future.
Certificate of deposit (CD)
A document which shows that the bearer
has a specified amount of money on deposit with a bank,
stock-brokerage firm or other financial institution.
CHAPS
Clearing House Automated Payment System.
An electronic way of transferring money between accounts.
Charge
Security the lender relies on when
granting a mortgage.
Charge certificate
A certificate from the Land Registry
that shows the boundaries of a property and gives details
of covenants affecting it.
CML
Council of Mortgage Lenders. Building
societies, banks and other lenders are members of this
trade organisation.
Code of practice
An agreement that certain professions
can sign up to in which they agree to act or serve in
a certain way and which therefore protects the consumer
in areas (such as estate agency) which are not regulated
by an institution.
Collateral
The property or other asset which the
lender can sell to repay the loan if the borrower does
not keep up the mortgage payments. In most cases, the
home is collateral on a mortgage. If the borrower fails
to repay the loan, the property will be repossessed.
Collateral security
Additional security a borrower supplies
to obtain a loan.
Collection
The series of steps a lender takes
to bring a up to date.
Collusion
The action of two or more people to
break the law.
Commission
A percentage of the sale price which
the selling party receives. This can be an estate agent
in relation to a property, a broker selling you a mortgage
or other products and even a door to door salesman selling
you a nice new set of double glazing.
Commission amount
An amount deducted to reflect the costs
of providing a service.
Compound interest
The interest paid on the balance in a mortgage and on the accrued and unpaid
interest of the loan.
Compulsory products
Some lenders, at least for certain
loans, insist that you take out as a condition of the loan.
Consumer credit act
Act of legislation to define the rules
relating to lending money and aimed at protecting the
consumer when credit is agreed with a third party.
Contract
A legal document between two parties
confirming any sort of agreement such as terms of sale,
employment or service.
Contractual liability
The terms of a contract to which you
must abide. There may be financial or even criminal
penalties which you incur if if you do not meet your
contractual liabilities.
Contractual lien
A voluntary obligation such as a mortgage
or trust deed.
Contribution
An amount of money paid into an account.
This can be a 'one off' payment or on a regular basis.
Co-signer
A person who assumes joint liability
for a loan. The co-signer of a loan agreement is not
necessarily, however, a co-owner.
Council of Mortgage Lenders
An institution that sets out a which mortgage lenders volunteer to
stick to - they are not regulated by the government.
Counter cheque
A cheque withdrawal made over the counter,
issued by the cashier.
County court fee
This is charged when a lender provides
information to solicitors relating to county court rules
when your loan payments are in .
County Court Judgement
Whenever someone fails to pay for something
and is subsequently taken to court, the magistrate may
issue a County Court Judgement against that individual
to pay the outstanding debt. This may well affect your
ability to raise finances in the future.
Cover
In the context of insurance, cover
describes the specific risk a given policy protects
you against. Life cover protects your family against
the financial consequences of your death, buildings
cover against damage to the property that you live in.
Credit
A measurement of a person's ability
to pay bills on time. Several companies track individuals'
credit histories by detailing late or missed payments
on loans, credit cards and other debts.
Credit agencies
Companies such as Equifax or Experian
that are often used by lenders to assess your financial
background and determine the level of risk involved
with lending you money.
Credit averse
When a borrower has a poor credit history,
has previously been declared bankrupt or has outstanding
, they are often described as
credit averse. People with averse credit ratings often
have to pay higher interest rates on a mortgage.
Credit checks
These are checks made when you try
to borrow money or purchase goods on hire purchase,
and are used to determine the risk of lending you money.
They will examine your credit history and check for
payment defaults and what you owe to other financial
organisation. A credit agency is often used.
Credit history
If you have a history of bad debts,
or
to your name,
you may not be eligible for a mainstream mortgage. To
help ensure you are a good credit risk, a lender may
require references from your existing lender, bank or
landlord. In addition to this, many lenders will make
use of the services of one of the two large credit agencies,
Experian and Equifax. These offer a credit inquiry or
a full credit application, which show details of any
existing credit arrangements or county court judgements
against you.
Credit period
The time frame for which the lender
agrees to provide you with credit.
Credit rating
The degree of credit worthiness assigned
to a person based on credit history and financial status.
Credit reference agency
When assessing your application, a
mortgage lender will study your records. These records
are held centrally by credit reference agencies, and
contain information for many different aspects of your
life.
Creditor
An individual or institution to whom
a debt is owed.
Critical illness insurance
Covers an individual for life or for
a set period against a number of serious illnesses,
diseases and medical conditions. It pays out a single
tax-free lump sum on the diagnosis of one of the illnesses
specified in the policy details. The most common of
these included in a policy of this sort are: Heart attack,
Stroke, Cancer, Kidney or liver failure paralysis and
multiple sclerosis. AIDS is not usually included.
D
Daily interest
Interest on the home loan is calculated
and applied on a daily rather than a monthly or yearly
basis. Can lead to big savings.
Debt
Money owed to a lender.
Debt-to-income ratio
A ratio used by lending institutions
to determine whether a person is qualified for a mortgage.
Debt-to-income is the total amount of debt, including
credit cards and other loans, divided by total gross
monthly income.
Default
When one mortgage payment or a series
of payments are missed, the borrower is referred to
as being in default.
Deferral period
Applies to and is the length of time after you are unable to work
or make the claim before you can start to receive insurance
payouts. Typically this ranges from 30 to 60 days, though
for non-mortgage related products, the deferral period
can be as long as 90 or even 120 days.
Delinquency
Being late with loan payments.
Delinquent loan
A loan that involves a borrower who
is behind on payments. If the borrower cannot bring
the payments up to date within a specified number of
days, the lender may begin proceedings.
Dependants
Person(s) who depends on another for
financial support.
Direct debits
A payment made from your account automatically
to pay bills etc, usually amounts that vary, e.g. A
gas bill.
Direct lenders
Provide financial services over the
telephone and through the internet. Lower overheads
resulting from a lack of high street premises and centrally
streamlined processes mean that the overall costs are
much lower and part of this saving is used to deliver
cheaper products. Add to this the convenience of arranging
a mortgage outside working hours from your own home,
and it is easy to see why these new operations are finding
favour.
Disability insurance
An insurance policy which covers an
individual's ability to produce income.
Discount period
The time at the beginning of a mortgage
life span when you are offered reduced repayments. Can
be useful to help you overcome the often significant
outlay involved with buying a property.
Discounted loans
With a discounted rate loan, the Standard
Variable Rate is temporarily reduced by a set amount
for a specified period. This usually ranges from one
to five years. Once the discounted period is over, you
then revert to paying the prevailing . With this type of mortgage, it is the discount
that is fixed and not the actual rate.
E
Early redemption penalties
Charges paid to the lender in compensation
for lost interest if you your loan ahead of schedule.
Penalties can be stepped just like discounts, and can
be particularly severe within the first year. This is
to ensure that the costs that the lender endures in
setting up the mortgage are always covered. Penalties
can be a fixed sum of money, though are often proportion
of the loan. With cashback mortgages, you often have
to repay the amount of money you received as cashback.
Early repayment period
A period of time that applies to certain
types of loan during which a charge will be made if
the loan is repaid in full or in part or its terms are
varied at the borrower's request.
Effective gross income
Additional income that a lender considers
when assessing the of a potential borrower.
Eligibility criteria
These are criteria which you must satisfy
before an account or service application can be progressed.
Employment status
A term used by lenders to describe
potential borrowers' working arrangements. Self-employed
applicants are sometimes seen as a greater risk than
employees. Many specialist lenders and mortgages have
emerged in recent years designed specially for different
types of employment status.
Equity
Your equity in the new home is the
proportion of the value of the property that is free
from debt.
Equity release
Equity release or home income schemes
allow you to generate either a lump some or a regular
income in return for allowing the lender to take ownership
of a portion of your home. These are often used by people
in later stages of life who have paid of all or most
of their mortgage and who are looking to raise funds
without borrowing money.
Excess
Applies to an insurance claim and is
simply the first part of any claim that must be covered
by yourself. This can range from £50 to £1000 or higher.
Increasing your excess can significantly reduce your
premium. On the other hand, a waiver can sometimes be
paid to eliminate any excess at all. Always check the
excess in your policy.
Exclusions
These are events, instances or possessions
which are not covered by your household or other insurance
policy. This can be confusing as the main policy may
seem to imply that such events, instances or possessions
are covered only to excluded in the small print of the
policy. Moral: Read the small print.
Executor
A person appointed to carry out the
instructions in a will. If there is no will, a probate
court will appoint anexecutor.
Existing liabilities
Expenses taken into account by a mortgage
lender when assessing an applicant’s ability to repay
the loan. These include loan repayments, maintenance
payments etc.
Extended redemption penalty
This is where the continues beyond a or rate period, effectively
tying you in to the much higher variable rate for a
period of time after the fixed or capped period. As
a result you get stuck paying an uncompetitive rate
that eats into the gains you may have made from having
the fixed rate or capped rate in the first place.
|
Best buys
