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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
P
Payment cap
A legal limit on the amount a monthly payment can increase on an variable rate loan.
Payment default
This results when you are unable or simply unwilling to meet your loan repayments.
If you default on your payments, the lender may ultimately be entitled to sell your home in order to recover the loan.
Different lenders will have different policies on how long they give you before they start the legal proceedings to
recover the loan. Many will have a separate schedule of charges which you will incur before they start proceedings.
Payment holiday
A short break from regular mortgage repayments, sometimes offered with flexible mortgages.
This can sometimes be a useful feature for self-employed people or others with irregular income.
Payment of balance
This usually takes place between a week and a month after exchanging contracts.
It is possible to have a simultaneous exchange and completion if you are in a real hurry to get moving.
When you complete the sale, your solicitor forwards the remaining balance of the purchase price to the seller's solicitor.
You then have the right to take occupancy of the property and are free to move in.
Payment protection insurance
A type of insurance that pays your loan for you if you become unable to work for an extended period
of time, as a result of redundancy, accident, sickness or disability. Most non-mortgage PPI products are taken
out for a length of time that corresponds to the life of the loan it is protecting.
Payment shock
Payment shocks are when the ends and the monthly repayments jump by a large amount
to match the .
You must be sure that you can budget for this in your monthly expenses.
Percentage advance
The size of a loan expressed as a percentage in relation to the value of the property.
Policy exclusions
These are events, instances or possessions which are not covered by an insurance policy.
Portability
A product feature that governs whether you can take the loan with you if you move during the term.
Premium
In the context of insurance, a premium is the regular sum you pay to keep your
in force.
Prepayment penalty
Lenders can impose a penalty on a borrower who pays a loan off before its expected end date.
Prime rate
The best interest rate available to a lender's most qualified customers.
Principal
The amount of money that the borrower owes on a loan - the amount on which interest is calculated.
Private Medical Insurance
This insurance which gives you access to private medical care in the event of injury or illness.
This will not normally cover injuries or illnesses present prior to accepting a policy. The main downside to most
of these plans is that you usually have to pay for hospital accommodation, surgeon's fees, and drugs or medication
upfront and then receive a refund once your claim has been processed.
Protection products
A protection product shields you from exposure to the financial hardship caused by events such as
unemployment, illness or injury. Some protection products are designed to provide additional medical or financial
benefits to those that are available through the state system.
Q
Quotations
Borrowers are advised to shop around for quotations from different lenders before making a commitment.
A quotation is also an illustration of the costs involved in the loan and repayments.
R
Rebuilding cost
This is the recommended amount (assessed by your property valuation) that you should take out
for.
Redemption
This is the right of the to recover mortgaged property on repayment of the loan and any interest
due. This legally means that once you as the borrower have finished repaying the loan you took out, the property is yours
and the lender has no further claim on it. If you pay off the loan ahead of schedule you may face a redemption penalty
which compensates the lender for loss of interest.
Redemption penalties
Charges paid to the lender in compensation for lost interest if you redeem your loan ahead of schedule.
Penalties can be a fixed sum of money, though are often proportion of the loan.
Redemption statement
The outstanding amount to be repaid on an existing loan.
Redundancy insurance
A form of income protection that does not cover any form of sickness, injury or disability.
The purpose of this type of policy is to replace income lost through a short to medium term period of redundancy.
It provides you with a monthly tax-free income to cover a portion of your lost earnings. It is often sold in conjunction
with the accident, sickness and disability element of income protection policies, in which case it is known as
.
Reinstatement value
The cost of rebuilding your home should it be destroyed.
Remaining balance
The amount of unpaid on a home loan.
Remaining term
The original loan minus the number
of payments made.
Repayment period
The period over which the borrower must repay the lender.
Repayment plan
When a borrower falls behind in loan payments, many lenders will negotiate a repayment plan rather than go to court.
Repayment term
The period of time over which you will repay your mortgage to the lender.
Repo rate
The Bank of England base rate.
Repossession
Usually occurs after a borrower seriously
on payments. The lender then legally evicts the borrower
and usually auctions the property to recover losses.
Restructured loan
A loan in which new terms are negotiated.
Retail Price Index
An index of the average level of prices in the UK. Insurance companies often link contents insurance
policies to it.
Retrieval cost
The cost incurred to recover amounts or items.
Review of rate
The interest rate you are charged can be reviewed either annually or on a monthly basis.
This feature does not affect fixed rate loans during the fixed period.
RPI
An index of the average level of prices in the UK. Insurance companies often link contents insurance policies to it.
S
Salary
The money you receive from your employment. Commission, overtime and bonuses are not normally considered
as part of your gross income by the lender, unless you receive them at a guaranteed level.
Security
A piece of property designated as .
Self-employed
A person who operates as a sole trader or as part of a partnership.
Standard payment calculation
A calculation that is used to determine the monthly payment necessary to repay the balance of a home loan in equal installments.
Standard Variable Rate
The Standard Variable Rate is the rate which many mortgages revert to after the introductory offer,
fixed rate or is over. They are the simplest and most traditional mortgage product with no upper or
lower limit on the rate charged, and the bank can raise or lower the rate at their discretion (though usually this is
done broadly in line with the base rate).
Standing order
A regular payment for a fixed amount that you can ask us to make from your account to another
specified account.
T
Tax relief
The government allows an artificially low tax rate to encourage purchases or savings such
as with pensions and s.
Telegraphic transfer
Electronic transfer of money between two parties.
Tenure
Whether a property is freehold or leasehold.
Term
The period of years over which you take the mortgage and when you have to repay it.
Most new mortgages are taken on a 25-year term.
Tied agents
Many agents and advisers have access to mortgages that you would not be able to arrange
on the high street or via a direct operation. They may be representatives of a particular financial
institution or estate agents and only be able to offer products from that particular provider.
They can still call themselves financial advisers, so long as they don't use the word 'independent'.
Tie-in period
As a condition of a special mortgage deal (
or
, for example),
you may have to agree to stay with the lender for a period of months or years after the deal has ended.
If you move your loan elsewhere during this period, you may have to pay an
.
Title
Evidence of the right of property ownership; can be held solely, jointly, in common
or in corporate or partnership form.
Title deeds
Documents stating who has title or right to the ownership of a property, which also
show the boundary of the land.
Title documents
The legal documents which provide proof of ownership of a property.
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