A guide to a lot of the terms employed in the consumer finance market.
Acceptance Rate – The percentage of shoppers that are successful when looking for a loan or charge card. 66% if not more applicants need to be offered the advertised rate termed as the Typical APR (See ‘Typical APR’ below).
Annual Percentage Rate (APR) – The rate appealing payable annually around the loan or bank card balance. This allows prospective customers to compare lenders. Under the Consumer Credit Act Lenders are legally instructed to disclose their APR.
Arrears – Missed payments on financing, plastic card, mortgage or most forms of debt are termed Arrears. The borrower carries a legally binding obligation to pay back any arrears immediately.
Arrangement Fee – Generally with the administration costs of generating a mortgage.
Base Rate – The rate of interest set with the Bank of England. This is the rate charged to banks for lending in the Bank of England. The base rate and just how it may improvement in the future includes a direct influence about the interest rate a bank may charge the customer on financing or mortgage.
Business Loans – A loan especially for a business and usually based around the businesses past and likely future performance.
Car Loan – A loan specifically with the purchase of an automobile.
Consumer Credit Association (CCA) – Represents most businesses in the buyer credit industry. Government, local authorities, financial bodies, finance focused media and consumer groups are typical members. Members sign a constitution and must consume a code of practice and business conduct.
County Court Judgement (CCJ) – A CCJ is usually issued by a County Court with an individual that has failed to be in outstanding debts. A CCJ will adversely customize the credit record of your individual and will possibly cause them being refused credit. A CCJ will stay on the credit record for 6 years. It is possible to avoid this major negative stain on your personal credit record by settling the CCJ 100 % within a month of receiving it, in such a case no information of the CCJ is going to be stored on your credit history.
Credit Crunch – A situation where Lenders trim down their lending simultaneously usually into a shared fear that borrowers will be unable to repay big debts.
Credit File – Information stored by credit reference agencies, for example Experian, Equifax and CallCredit, by using an individuals credit and borrowing arrangements. The Credit File is checked when Lenders look at a credit application.
Credit Reference Agencies – Companies that keep records of an individual credit and borrowing arrangements, amounts owed, with who and payments made, including any defaults, CCJ’s, arrears etc.
Credit Search – The general search undertaken with the Lender using the credit reference agencies.
Debt C0nsolidation – The transfer of multiple debts to your single debt via a borrowing arrangement or charge card.
Default – When a regular debt repayment is missed. A default is going to be recorded with an individuals financial history and will adversely modify the chance of success associated with a future credit applications.
Data Protection Act – An act of Parliament in 1998 as well as the main legislation that governs using personal data within the UK. Lenders are certainly not allowed to share a person’s personal data directly for some other institutions or companies.
Early Redemption Charge – A fee charged by Lenders in case a borrower pays back their debt prior to debts agreed term is reached.
Equity – The value a house has beyond any loan, mortgage and other debt held upon it. The amount of money someone will receive as long as they sold their home and repaid the debt around the property 100 %.
Financial Conduct Authority (FCA) – The government appointed institution in charge of regulating the finance market.
First Charge – The mortgage over a property. A Lender that has first charge with a property will need priority for repayment of the mortgage or loan through the funds available as soon as the sale of real estate.
Fixed Rate – An interest rate it doesn’t change.
Homeowner Loan – Also typically referred to as a secured loan. A Homeowner Loan is available to individuals who own their particular home. The loan are going to be secured from the value on the property usually around the form of any second charge about the property.
Instalment Loans – Multiple loan repayments spread over a length. Depending for the Lender their could be flexibility inside the repayment amounts and schedule.
Joint Application – A loan or some other credit application manufactured by a couple instead of a single person e.g. wife and husband.
Lender – The company giving the loan or mortgage.
Loan Purpose – The purpose which is why the loan was acquired.
Loan Term – The period of your energy over which the loan are going to be repaid.
Loan To Value (LTV) – Generally connected with a mortgage and making the form of an percentage. This is the financing amount with regards to the full value with the property. e.g. somebody may get offers for a mortgage of 90% LTV with a property worth £100,000. In this case the offer can be £90,000.
Monthly Repayments – The monthly premiums made to settle a borrowing arrangement including any interest.
Mortgage – A loan taken specifically to finance acquiring a property generally a home. The property emerged as security towards the Lender.
Online Loans – Although most loans are available online. The Internet has allowed for that development of technology that allows for your faster processing of that loan application than fliers and other modes. In some cases that loan application, agreement along with the funds appearing as part of your account might take as little as fifteen minutes or less.
Payday Loan – A short term loan of up to 31 days and that is repayable in your next payday. Payday loans feature a high APR as a result of shorter term of the financing.
Payment Protection Insurance (PPI) – Insurance to hide debt repayments if the borrower be unable to maintain your loan payments for any quantity of reasons including redundancy, illness or even an accident.
Personal Loans – A general loan for virtually every purpose as well as in varying amounts that could be provided with an individual based high on their history of credit.
Price For Risk – Lenders now take over a range appealing rates which are chosen based while on an individuals credit history. An individual which has a poor credit worthiness is deemed High Risk and definately will likely be provided a higher interest as the Lender factors from the possibility of them defaulting on your loan payments. Conversely somebody with a high credit worthiness and a good credit rating is considered Low Risk and will likely be offered a cheaper rate of curiosity.
Qualifying Criteria – The eligibility requirements required from the Lender. The most basic criteria needed to qualify for that loan in the UK are; permanent UK residency, age 18 or over plus a regular income. Many Lenders can also include extra lending conditions.
Regulated – financial ‘products’ which might be overseen with the Financial Conduct Authority (FCA). Lenders must consume a code of conduct and people are protected through the Financial Services Compensation Scheme (FSCS).
Repayment Schedule – The time period over which that loan will be repaid and the information on the loan repayment amounts.
Second Charge – A second loan, as well as any other loan, that may be secured against a persons property.
Secured Loan – Also popularly known as a Homeownr Loan. A secured loan is simply available to to homeowners. The amount you borrow is secured up against the value in the property. The Lender gets the right to repossess your home should you don’t maintain the borrowed funds repayments.
Shared Ownership – An agreement in which a person owns only a share of the home and property. The remaining percentage is of a third party normally a housing association. The individual will have a mortgage for the part from the property they own and pay rent about the part on the property they don’t own.
Total Amount Repayable – The total amount of the borrowed funds plus a persons vision and any applicable fees.
Typical APR – The advertised interest that is offered into a minimum of 66% of successful loan applicants.
Underwriting – The process of verifying data and approving credit.
Unregulated – Not covered and regulated because of the Financial Conduct Authority (FCA).
Unsecured Loan – A loan that will not require collateral and is particularly provided on ‘good faith’. Under the belief with the Lender that you could repay the borrowed funds based with your credit score, history of credit and financial standing amongst other elements.
Variable Rate – An rate of interest that will change during the financing repayment period.