Glossary

So you're stuck between an APR and a hard place? Or you'd like an advance, if only you knew what it was; or perhaps you think your credit is somewhat adverse, or is that reverse? We’ve compiled a list of financial terms to help you know your equity from your RTB.

APR (Annual Percentage Rate)
This is a figure provided to help you compare true costs between different loan options, when you're looking to borrow money.

Advance
This is the amount of cash lent under the loan agreement.

Adverse credit
This is a loan or credit not well paid by the borrower, according to the loan or credit agreement.

Arrears
A loan or credit agreement of which the payments have not been paid for a period of more than 30 days.

Bad credit
A term used to describe a past loan or credit not paid in accordance to the agreement of the loan or credit.

Bankruptcy
This is the position a borrower reaches where he cannot contribute payments to any credit or loans anymore. Any assets belonging to the borrower may be confiscated to settle outstanding credit and loans.
After a period, some or all of the lenders may write off any debt the borrower may owe them.
If a person is declared bankrupt by the courts, it may be years before he may obtain credit in a normal way again, if it is ever possible.

Bridging loan
A bridging loan is taken out in the case of buying property, and covers the time of the sale of the property. Bridging loans are set out usually over a period of a few months, rather than years, and interest rates for this type of loan are usually higher than interest on long-term mortgages.

Broker
A broker acts as intermediary between a lender and borrower. The broker scans the marketplace for possible lenders for the borrower.

Commercial finance
Commercial finance refers to companies looking to borrow money for business purposes. Commercial property is usually set up as collateral for commercial finance. Commercial finance may cover many different business areas, such as expansion and cash flow.
Consolidation loan
A consolidation loan is one loan to cover all other loans. You may take out a loan to finish off all other debt, creating a situation where you have only one debt to pay off, which means that your interest could be a lot less.

Consumer credit act
Loans and other credit agreements are covered under the consumer credit act. The law protects borrowers, and covers aspects of how lenders are to operate within the law.

Cooling off period or consideration period
This is the time period the law gives a borrower to consider a loan offer they received. Within this time period, the borrower may cancel their application if they wish to do so.

Credit file
This is the file of credit history available on an individual, covering past credit and present credit. Lenders may make use of a credit file to help decide whether credit should be advanced to an individual.

Credit history
Credit history is a reflection of an individual’s credit activity in the past and present and is used by lenders to build a credit profile of individuals looking to take out a loan or applying for credit.

Credit rating
This is a borrower rating given to an individual based on their past and present credit history.

Credit reference agency
A credit reference agency holds details of the credit activities of individuals looking for credit or a loan. Lenders make use of credit reference agencies to check up on individuals credit rating.

Credit scoring
Many banks and lenders make use of a scoring system to ascertain whether an individual qualifies for a loan or credit. The credit score covers various elements such as income, past credit and current credit record.

CCJs – County Court Judgements
A county court judgement is a judgement registered against an individual or company owing another party money. The party who is owed the money needs to approach the county court in order to get a CCJ against the offending party.

Debts
This is the amount of money outstanding on a debt or debts.

Debt consolidation
A borrower may make use of debt consolidation to bring all credit and loan agreements together. This means that all credit and loans are paid with one loan, which means the individual consolidating the debt has only one account to clear.

Debt management
An individual may make use of a debt management programme to help manage debt, if the individual has a lot of debt in the form of credit, loans and mortgages. A debt management programme may offer a borrower the opportunity to have existing credit payments lowered, or interest charges frozen for a set time. This offers the borrower the opportunity to gain control over his finances.

Default
A borrower that goes into arrears on any payment has ‘defaulted’ on their loan or credit agreement. The account is known as an account in default when the lender issues a ‘notice of default’ to the borrower. This is usually the stage before a county court judgement.

Deeds case
This is a case where a property is owned outright, and no mortgage is outstanding or secured loans owing.

Discharged bankrupt
A discharged bankruptcy is the position an individual is in after having paid off, or had written off, all debt. It may also be a combination of the two. This individual is now free from bankruptcy. A once bankrupt individual can apply for a discharge certificate at the court, after settlement has been agreed upon and reached.
Even though a bankruptcy may reflect on an individual’s record for some years, some institutions may lend money to a person declared discharged.

Equity
Equity is the difference between the amount secured on a property by way of a mortgage, and the current value of that property.

Fixed rate
This refers to the type of interest on a loan. A fixed interest rate does not change for the term of the repayment.

Loan advance
The amount of money lent under a loan agreement.

LTV – Loan To Value
The LTV is similar ot the equity calculation, but includes the loan advance amount.
LTV = (mortgage balance + loan advance) / property value.
The closer the margin between the two values, the higher the LTV percentage will be.

Negative equity
A situation where the mortgage balance is higher than the property’s current value.

Non-status
Mortgage companies not recognised as well-known high street lenders offer products that are classified as non-status loans or mortgages.

RTB – Right To Buy
When a council tenant is able to buy the property they live in from the council, they are classified as having the ‘Right To Buy’.

Redemption penalty
Upon the early settlement of a loan or similar financial agreement, lenders may charge a redemption fee, which is usually calculated according to the number of months left in the payment plan.

Secured loan
A secured loan is a loan taken out with collateral put up for the period of the loan. Interest rates are generally lower than with unsecured loans.

Self-declaration – self certified income
This is a term used to describe an individual applying for a loan or credit who is self-employed or forms part of a partnership, or is a director at a firm, or sole trader.

Settlement figure
The settlement figure is the amount calculated by a lender in order for the borrower to settle the loan in full.

Shared ownership
A shared ownership refers to a property that is jointly shared by more than one party.

Sub-Prime
A sub-prime lender is one who offers financial services to individuals with a bad credit record.

Variable rate
A variable rate, as opposed to a fixed rate, peaks and drops according to the base rate established by the Bank of England. Variable rate agreements are used as a safeguard for times when the Bank of England experience steep drops or peaks.