Learn more about terms used in loan comparisons and financial guides by using our glossary below, and you can skip to the starting letter using the following navigation:
A
Acceptance rate
The percentage of applicants who are granted credit. Legally, no less than 66% of successful applications have to be offered the advertised rate (also called the Typical APR).
Adverse credit
Also known as a poor credit history or bad credit record, Adverse Credit can be affected by CCJs, house repossession, IVAs or repayment arrears. Learn about improving your credit here.
Amortization
Loan payments by equal periodic amounts calculated to pay off the debt (including accrued interest) at the end of a fixed period.
Annual percentage rate (APR)
The APR indicates the real rate of interest payable over a year, including fees, charges and administration costs. Lenders are legally required to display the APR (Consumer Credit Act).
Application Checklist
Also known as form OLP-09, this is a list of documentation that the borrower and the campus need to provide to the Office of Loan Programs for pre-approval or loan approval.
Appraised Value
The dollar value assigned to a single-family residence. The appraiser must be approved by the Office of Loan Programs.
Arrears
An account that has overdue payments. The borrower has a financial and legal obligation to repay the arrears to the lender.
Arrangement fee
This fee covers the administration costs of setting up a loan, usually a mortgage.
Automated Clearinghouse (ACH)
An electronic funds transfer network that enables direct money transfers between participating bank accounts and lenders, which is available only to borrowers who are not currently on active payroll status.
B
Balloon Payment
A (usually) final payment on a promissory note which is significantly larger than the regular instalment payments provided under the terms of the promissory note.
Beneficiary
The lender on the note secured by a deed of trust.
Bridging loan
A bridging loan is a short-term loan, usually quite an expensive one, designed to help secure a house purchase when you have not yet sold your own house.
Business loan
A business loan is taken out by a business, usually to make an asset purchase or to make refurbishments to the business premises. Owners may be asked to put up collateral, such as your personal property, as security to repay the loan.
C
Car loan
A personal loan that is used to purchase a car.
Certification of Eligibility
Also known as form OLP-30, this is a form to certify that the applicant is eligible for Program participation, and the amount of the loan allocation.
Close of Escrow
The meeting between the buyer, seller and lender (or their agents) during which the property and funds legally change hands.
Community Property
Property considered to be owned by both husband and wife, as it was acquired by husband and wife, or either, during marriage, when not acquired as the separate property of either.
Consumer Credit Association (CCA)
The CCA is the point for contact for government, local authorities, other finance sector representative bodies, the media, and consumer groups who have an interest in the industry. It represents the majority of businesses in the home credit industry. Members must sign a constitution, a code of practice and a business conduct pledge. http://www.ccauk.org/
County court judgement (CCJ)
If a person fails to pay an outstanding debt, a CCJ is issued by a County Court. A CCJ will affect an individual’s credit rating, and will remain on a person’s credit file for seven years, unless settled within 30 days.
Co-Borrower
Any individual who intends to occupy the property as their primary residence, will take a title interest in the property, and who will assume responsibility on the loan.
Co-Signer
Any individual who will assume responsibility on the loan, but will not take a title interest in nor occupy the property. You can learn more about guarantor loans here.
Credit file
Experian, Equifax and Callcredit hold files which contain information relating to an individual’s credit arrangements. Lenders refer to a these files when assessing a credit application.
Credit reference agency
Compiles consumers’ credit records and releases information to companies that offer credit terms. You have the legal right to a copy of your credit report from one of these agencies, but there is usually a nominal fee charged by the agency (like Equifax and Experian). Most lenders will use such an agency during a loan or mortgage application.
Credit search
A lender will contact the main credit reference agencies, before processing your application, to obtain credit history details and to learn of any existing credit agreements you may have.
Curtailment
An additional payment made to reduce the principal balance of a loan.
Current MOP Rate
Refers to the MOP rate currently in effect for Program loans. The “locked-in” MOP rate is calculated by using the four-quarter average of the University’s Short-Term Investment Pool (STIP), rounded to the nearest five hundredths of a percent and adding an administrative fee component of 0.25%.
D
Debt consolidation
The transfer of more than one existing debt onto a single loan or credit card. We’ve compared the best debt consolidation loans here.
Default
The failure of a borrower to keep up with loan repayments. Defaults damage an individual’s credit score and reduce the chance, affordability, and size of future credit.
Data Protection Act
A law protecting an individual’s personal information. For example, lenders are not allowed to pass on your details to another institution without your permission.
Debt management
A Debt Management Plan (DMP) is a repayment scheme offered by a debt management company. Debt management companies will negotiate your repayments over a number of years, making them more affordable.
Downpayment
The difference between the purchase price of real estate and the loan amount. This creates some equity in the property, and is meant to increase the borrower’s stake (and risk) in the transaction. The borrower is responsible for providing the downpayment.
E
Early redemption charge
If a borrower redeems a loan or mortgage early, a penalty fee may be levied by lenders to compensate for the loss of expected interest over the rest of the agreed-upon loan repayment period.
Equity
The value of a property, minus any debts secured against it.
F
Financial Conduct Authority
In order to legally continue to do credit business in the UK, all credit lenders and brokers have to be authorised by the Financial Conduct Authority (FCA).
First charge
A lender with first charge over a property has a first call on any funds available from the sale of the property. An individual’s main mortgage is usually the first charge.
Fixed rate
A set rate of interest; it does not fluctuate.
H
Hazard Insurance
A contract through which an insurer undertakes to compensate the insured for loss on a specific property due to certain hazards. (See Homeowner’s Insurance Policy).
Home Loan Coordinator
Serves as the primary contact at the campus level for loan applicants and is designated by the Chancellor of each campus and Laboratory Director.
Homeowners Association
An organization of homeowners whose major purpose is to maintain and provide community standards, facilities and services for the common safety and enjoyment of the residents of a certain development or neighbourhood.
Homeowner loan
A homeowner loan is available only to individuals who own their own home; it is sometimes called a ‘secured loan,’ because the value of the debt will be secured against the property.
I
Interest rate
The percentage at which interest is charged on a loan or mortgage. This can be fixed or variable. The advertised interest rate for a loan is known as the APR (or APRC for mortgages).
J
Joint application
An application made by more than one person.
L
Lender
The company providing a loan.
Loan purpose
The reason for which the loan is required and for which the oney will be used.
Loan term
The length of time within which the loan should be paid.
Loan to value (LTV)
This is the loan amount in relation to the value of the property it is secured against. For example, a £150,000 mortgage to purchase a £200,000 house would require a 75% LTV.
M
Monthly repayments
The amount paid to the lender each month in order pay off a loan and interest within the designated time period.
Mortgage
A loan taken out to purchase a home or to pay for your existing home, where the property itself serves as security for the lender. You can compare the best mortgage deals here.
P
Payday loan
A short term cash advance, re-payable on your next pay day. The maximum period of time you can take out a payday loan is 31 days, and rates are very expensive. Compare the best payday loans online here.
Payment protection insurance
Covers loan, mortgage or credit card repayments in the event of redundancy, ill health or an accident preventing the borrower from being able to work.
Personal loan
A personal, or unsecured loan, taken out over a fixed term. This type of loan is available – sometimes without security – from a bank, building society or other financial institution. They are covered by the terms of the Consumer Credit Act. A sum will be loaned to you in return for you agreeing to make regular repayments over a set period, usually between six months and 10 years. Browse the best personal loan deals here.
Price for risk
Different rates of interest can be charged, depending on the borrower’s credit score. A person with a low credit score will be charged a higher rate of interest, as the risk of default or missed payments is perceived to be higher due to past financial problems.
Q
Qualifying criteria
Standard criteria required in order to qualify for a loan includes being a permanent resident of the UK, being over the age of 18 and in receipt of regular income. Providers may attach additional lending conditions.
R
Regulated
Some financial products are ‘Regulated,’ that is, they are covered by the Financial Services Authority. Providers must adhere to a code of conduct and consumers benefit from the protection of the Financial Services Compensation Scheme. They can seek recourse for any problems relating to their product through the Financial Ombudsman Service.
Repayment schedule
An agreed-upon schedule detailing how, at what frequency, and over what time period, a borrower will repay a loan.
S
Second charge
A loan, in addition to a mortgage, that is secured against the borrower’s property. In the event of a default, the mortgage (first charge) is paid out prior to the second charge.
Secured loan
A secured (‘homeowner’) loan is available to individuals who own their own home. The value of the debt is secured against the property, which could therefore be at risk if you fail to keep up with repayments. Browse the best secured loans here.
Shared ownership
An arrangement whereby an individual shares ownership of the home they live in. A third party, often a housing association or social landlord also partially owns the property, but does not reside there. The individual pays a mortgage on the portion they own and pays rent (to the other owner) on the remainder.
T
Total amount repayable
The total amount of the original loan, all interest, and fees. Compare the lowest amounts on the Best Loan’s website.
Typical APR
The typical APR is the advertised interest rate. It must be offered to a least 66% of successful applicants. This means that up to a 34% of successful applicants may be offered an interest rate higher than the one they applied for.
U
Underwriting
Verifying data and approving a loan.
Unregulated
Not covered by the Financial Services Authority.
Unsecured loan
A loan (to a maximum of £25,000) that is not secured against property.
V
Variable rate
An interest rate that can fluctuate during the repayment term; not a set rate.