Loan Glossary
A comprehensive list of financial terminology
As Advantage Loans are one of the biggest unsecured loan brokers UK, we wouldn’t have got to where we are today if we didn’t offer a service that our customers could completely rely on.
We can find you the best loan to suit your circumstances, but it doesn’t just stop there. We want to make sure that you’re as informed as possible every step of the way.
So as a result, we have included some of the common terms used when arranging a loan to help you understand what they mean and avoid any unexpected additions.
Our list of definitions should help you understand the financial jargon so that you get the unsecured loan option that’s best for you.
We've also provided a Car Finance glossary.
APR
The Annual Percentage Rate (APR) is the percentage of interest charged against your loan each year. It takes into account the value of the loan from the start of the loan period to the end of the loan period. As with anything you buy, there are charges, and the APR rate is a way of comparing prices of loans from one company to the next, to get the best value for money. If the typical APR is 7% on a loan of £1000 for example, you will pay 7% of the total loan amount each year of the repayment, as interest and charges, which will automatically be part of your repayments.
Arrears
Amount overdue as a result of being behind payments.
Asset
Something that has earning potential or value.
Attachment (Scottish Bankruptcy)
Goods can be taken from the garage, garden shed, and driveway.
Attachment of Earnings
This forces the debtor's employer to make deductions from the debtor's earnings and pay them to the creditor.
Bailiffs
Bailiffs are officers of the court, who can in certain circumstances be used by creditors to enforce judgments by collecting debts and repossessing homes or goods.
Bankruptcy
Bankruptcy is legal procedure for dealing with debts when you cannot pay.
Budget (Financial Statement)
A Budget is a document listing details of income and expenditure.
Budgeting
The process of managing outgoings so that they don't exceed income.
Budget Surplus
The amount on your budget by which your income exceeds your expenditure before allowing for offers of payments on non-priority debts.
Budget Deficit
The amount on your budget by which your expenditure exceeds your income before allowing for offers of payment on non-priority debts.
Charge for Payment (Scottish Bankruptcy)
Full amount outstanding requested to be paid in 14 days.
Charging Order
This secures the debt on your home usually with conditions concerning payments. A charging order has the effect of converting an unsecured debt into a secured one.
Cooling Off Period
The law states that every lender must allow a cooling off period of at least 10 days during which a borrower can cancel their loan and repay the balance without a penalty charge.
Contractual Payment
Payment agreed in the original contract with the creditor.
County Court Claim
Initial form sent by the court to a debtor when a creditor initiates court action.
County Court Judgment
A County Court Judgment (CCJ) gives details of the court's decision of a creditor's attempt to recover a debt in a civil court.
Creditor
Someone to whom you owe money.
Credit
Credit is a term that describes the lending of money from a financial institution to an individual or company.
Credit Agreement
The document that lays down the agreement under which your Loan is arranged. The Credit Agreement is normally the first document that you would receive. Your Loans Credit Agreement will contain information on your loan as well as details about how your personal information will be kept and used. Also included are any Direct debit Mandates.
Credit Rating
A credit scoring systems which give points to items of information given on your application form when applying for credit.
Credit Reference Agencies
These are agencies which collect information about you from the electoral roll, County Court Judgements (CCJs), and information supplied by other lenders. This can include information such as if you have ever fallen behind with payments for previous loans, how many cheques you have had bounced, your bill-paying history, the number and type of accounts you have, collection actions, outstanding debt, and the age of your accounts.
The lender will submit details on how you manage your loan to credit reference agencies and other potential lenders may view this information. If the lender is forced to issue a CCJ against you or your guarantor, if you have one, the CCJ will be recorded for six years from the date of the judgement - unless the judgement is paid in full within one month of judgement being given, when the court can remove the record if you contact them.
If a CCJ is paid after more than one month, it can be marked as 'Satisfied'. When you apply for credit (credit card, loan, mortgage), a lender will check your credit score and use this information in its own Credit Scoring process.
Credit Scoring
Credit scoring is a system creditors use to help decide whether to give you credit. When you apply for a loan you give information about yourself - your age, occupation, and your financial history - your bank accounts, details of your mortgage provider, and any previous loans you may have had. Your information is then statistically compared to the credit performance of consumers with similar profiles. In other words, they try to predict how big a risk it is taking by allowing you to borrow up to a certain amount. If your total score reaches a certain level, then you 'pass' the credit score. If you don't score enough points, they may turn down your application, or, offer to lend you a smaller amount than you were hoping for.
Credit Search
This is a search that lenders make on your name and address with a Credit Reference Agency in order to assess your credit history. The search will then be noted against your records. This will inform other institutions that information has been requested about you. If we have asked for a guarantor for your case then a credit search is conducted on their details, too.
Data Protection Act
The Data Protection Act (DPA) was passed in 1998 and was designed to protect the rights of individuals’ information and regulate the use of your information in financial, and other institutions. The Act covers all personal data (information) about you processed by us and other institutions which will have information about you.
With this in mind, information about you has to be dealt with fairly and lawfully, must be accurate and up to date, and not transferred to other parties without your prior consent. This is why Advantage Loans perform a Security Check when you call, so we can be sure information about you and your financial history does not fall into the wrong hands.
Debtor
Someone who owes money.
Debt Consolidation
This is taking a new loan and using the proceeds to pay off several smaller debts.
Debt Management Plan
This is a repayment scheme for people unable to pay their non-priority creditors their full contractual payments.
Debt Collection Agency
A company which collects debts on behalf of a creditor, or who buys the debt from the original creditors.
Default Notice
This must be issued by creditors in respect of debts covered by the Consumer Credit Act 1974 before any further action is taken.
Direct Debit
The account holder instructs the bank or building society to comply with requests from a third party to make a series of payments to them.
Downshifting
Making major changes to one's lifestyle caused by accepting a reduced level of income.
Early Settlement
If you decide to settle your loan early you have the option to pay the outstanding balance in one go as an Early Settlement. Once you have repaid the remaining loan amount in full you will no longer have to pay the monthly repayments. You'll be provided with an Early Settlement Figure which will provide you with details of any rebate owed to you and any administration costs incurred in settling early.
Early Settlement Figure Statement
If you decide to settle your loan early you will be provided with an Early Settlement Figure Statement. This statement will detail your loan amount, number of repayments made and present you with the final Early Settlement Figure still owed. This figure will be the total amount due to be repaid and will include any administration charges or details of any rebate due to you.
Equity
The difference between the market value of your house and the amount outstanding on your mortgage.
Exceptional Attachment (Scottish Bankruptcy)
Goods can be taken from the home, garage, garden shed, and driveway.
Financial Associate
Whenever you hold or apply for a joint financial product with another person, you become financially 'associated' with that person on the files of the Credit Reference Agencies. This means that your credit records are linked with the other person’s. If you apply for credit in the future, the lender will carry out a Credit Search that may include details held on anyone with whom you are financially associated.
Financial Ombudsman Service
The Financial Ombudsman Service is a free service provided by the Government and set up by our financial regulator, the Financial Services Authority (FSA). The service is a means through which you can seek advice if you have a complaint about any financial product or service that has been provided to you. If you have been unable to resolve the dispute with Advantage Loans within eight weeks of your first complaint you may then pass the complaint to the Financial Ombudsman Service, who will deal with your complaint and assess whether you have been treated fairly.
Financial Services Authority
The Financial Services Authority (FSA) is the regulator of the financial service industry. This means the FSA ensures that all financial providers and creditors adhere to the same rules to ensure a fair deal for you, the consumer.
Formal Reminder
If you are late in meeting the repayments of your loan your lender will send you a first reminder letter, and then a formal reminder letter to make your repayment. A Late Payment Charge can also come with the Formal Reminder letter.
Guarantor
A guarantor is a person who is willing to guarantee the repayment of a loan agreement. Your Loan Guarantor could be a friend or family member and must be in full time employment with a good credit history. Although lenders do sometimes accept guarantors who are self employed, Tenants or living with parents credit checking and income requirements may be more stringent in these circumstances.
Guarantee and Indemnity
This document that lays down the agreement under which a person can stand as Guarantor for a loans credit agreement. The Guarantee and Indemnity document will probably be contained in the ‘application pack’ that you receive. Your Loans Guarantee and Indemnity Form will contain information on the loan agreement as well as details about how your personal information will be kept and used by us, and a Direct debit Mandate which may be used to collect repayments in the event that the applicant fails to meet their commitments under the Credit Agreement.
Home Owner Loan
With most Unsecured Loans you can typically borrow up to £10,000 with a maximum repayment period from 5 to 10 years. When a loan is unsecured it means there is no absolute guarantee the loan will be repaid. A Home Owner Loan is different because it is secured on your home. This works like a mortgage, so the loan amount can be larger and the repayment period can be longer. The APR is also a lot less on a Home Owner Loan, which makes a cheaper, more secure finance solution for the long term. You can borrow up to 125% of the value of your property subject to status over a timescale ranging from 3 to 30 years.
Hire Purchase
An agreement where goods are hired for an agreed period, at the end of which the hirer has the option to purchase.
Individual Voluntary Arrangement (IVA)
A means of protecting yourself from your creditors by entering into a legally binding agreement supervised by an Insolvency Practitioner.
Insolvency Practitioner
In the United Kingdom an Insolvency Practioner is a person specialising in formal Insolvency cases. They are either authorised by the Secretary of State for Trade and Industry or licensed by a recognised professional body.
Irregular Bill
An occasional expense e.g. TV licence, car tax etcetera
Joint & Several liability
If two or more parties enter into a credit agreement they will each be liable for repaying the whole amount borrowed.
Late Fees
Fees added to the amount owed by the debtor when payments are late and where such fees are allowed for in the original contract.
Maximising Income
Increasing your income.
Monthly Expenses
The amount of money needed each month to pay your rent or mortgage, your gas, electricity and water, your food and other living expenses.
Non-Priority Debts
Non-Priority Debts are those where the creditor cannot deprive you of liberty, home or essential goods and services.
Official Receiver
An officer of the court who deals with bankruptcies.
Pre Contract Information
Your Pre Contract Information document will be sent to you with your Credit Agreement. The document includes details of the length of your loan, the amount you have borrowed, the APR, the amount and date of each monthly repayment. You should keep your Pre Contract Information document for reference purposes along with the Terms and Conditions document.
Priority Debts
Priority debts are those where non-payment gives the creditor the right to deprive you of your liberty, home or essential goods and services.
Repayments
Once you have agreed to take out your loan you will be liable to repay it in manageable monthly repayments for as long as your Loan Period. A Direct Debit Mandate will be set up with your bank to make automatic safe monthly repayments from your bank account. Once the loan has been completely repaid, you will no longer need to make any repayments.
Repossession
Process by which a creditor with a loan secured on house or goods (e.g. car) can take possession if you do not maintain agreed payments.
Secured Loan
Where the lender has a legal charge on assets (usually a house) giving rights of repossession over that asset if payments on the loan are not maintained.
Standing Order
This is an instruction signed by an account holder ordering a Bank or Building Society to make regular payments from a account of specified amounts on specified dates.
Tenant Loan
A Tenant Loan is another term for an Unsecured Loan. Tenant loans are aimed specifically at people who do not own any property. Tenant loans are a way for people who rent their accommodation from the council, private landlords or who live with parents to apply for a loan. Advantage Loans specialise in Tenant Loans.
Total Amount Payable
Once the lender has decided on your Loan Amount and Loan Period they will calculate the Total Amount Payable, which will include the original amount you have borrowed, and the total amount you will have paid once all of the repayments have been met on time. The amount will include your APR and will not include any charges made for Late Payments. This information will be sent to you on the Pre-Contract Information Document and printed on your Credit Agreement.
Unsecured Loan
A loan that is not secured on property or goods.
Warrant of Execution
This is issued by the County Court at the creditor's request allowing the court bailiffs to attempt to take and sell goods and use the proceeds to pay the debt.
Welfare Benefits
State funded allowances paid to those in certain defined circumstances including low income and disability.
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