Glossary of consumer financing conditions

A guide to many of the terms used in the consumer finance market.

A

Degree of acceptance – The percentage of customers who succeeded when applying for a loan or credit card. 66% or more of applicants must be offered the advertised rate, known as the Typical APR (See Typical APR below).

Annual Rate (APR) – The interest rate we pay annually on the balance of the loan or credit card. This allows potential customers to compare lenders. According to the Consumer Credit Act, lenders are legally obliged to disclose their APR.

Overdue liabilities – Lost payments on a loan, credit card, mortgage or most types of debt are called overdue debts. The Borrower has a legally binding obligation to settle all arrears as soon as possible.

Stacking fee – In general, the administrative costs of establishing a mortgage.

B.

Base percentage – The interest rate set by the Bank of England. This is the interest rate charged to banks for lending by the Bank of England. The base interest rate and how it may change in the future has a direct impact on the interest rate that the bank may charge the consumer on a loan or mortgage.

Business loans – A loan specifically for business and usually based on business results in the past and probably in the future.

° C

Car loan – Loan specifically for the purchase of a car.

Consumer Credit Association (CCA) – Represents most businesses in the consumer credit industry. Government, local authorities, financial authorities, finance-focused finance and consumer groups are all members. Members sign a constitution and must follow a code of practice and business conduct.

District Court Judgment (CCJ) – A CCJ can be issued by a district court to a person who has failed to settle outstanding debts. The CCJ will adversely affect a person’s credit registry and may result in a loan waiver. The CCJ will remain on the credit card for 6 years. It is possible to avoid this large negative spot on your credit record by settling the CCJ in its entirety within one month of receiving it, in which case there is no CCJ data to be stored in your credit record.

Credit crisis – A situation in which lenders reduce their loans at the same time, usually to a shared fear that borrowers will not be able to repay their debts.

Credit file – Information held by credit rating agencies, such as Experian, Equifax and CallCredit, on retail lending and borrowing arrangements. The credit file is checked when the Lenders review the loan application.

Credit agencies – Companies that keep records of credit and loan arrangements for individuals, amounts due, who and payments made, including all defaults, CCJ, arrears, etc.

Search for loans – The general demand undertaken by the Lender with the credit agencies.

e

Debt C0solidation – Transfer of multiple debts to one debt through a loan or credit card.

Default – When regular debt repayment is missed. Default will be recorded in the credit record of an individual and will adversely affect the chance of success of future credit applications.

Data Protection Act – Parliament’s Act of 1998 and the basic legislation governing the use of personal data in the United Kingdom. Creditors are not allowed to share personal data of individuals directly with other institutions or companies.

E

Early redemption fee – Fee charged by the Creditors if the borrower repays his debt before the agreed deadline is reached.

Capital – The value that the property has exceeds any loan, mortgage or other debt held on it. The amount of money that an individual will receive if he has sold his property and paid off the debt on the property in full.

F

Financial Conduct Authority (FCA) – The government has appointed an institution responsible for regulating the financial market.

First charge – Mortgage on property. A lender who has a first charge on a property will have priority to repay the mortgage or loan from the available funds after the sale of the property.

Fixed interest rate – Interest rate that will not change.

З.

Homeowner loan – Also known as a secured loan. The homeowner loan is only available to people who own a home. The loan will be secured against the value of the property, usually in the form of a second charge on the property.

I

Installment loans – Multiple loan repayments spread over a period of time. Depending on the Lender, they can be flexible in paying the amounts and schedule.

.

Joint application – Loan or other loan application made by a couple and not by one person, e.g. Husband and wife.

L

Lender – The company providing the loan or mortgage.

Purpose of the loan – The purpose for which the loan was acquired.

Loan term – The period during which the loan will be repaid.

Loan of value (LTV) – It is generally associated with a mortgage and is in the form of a percentage. This is the amount of the loan in relation to the total value of the property. for example, a natural person may be offered a 90% LTV mortgage on a property worth £ 100,000. In this case, the offer will be £ 90,000.

M

Monthly repayments – Monthly payments made to settle a loan, including all interest.

Mortgage – Loan taken specifically to finance the purchase of property in most cases housing. The property is offered as collateral to the Lender.

Oh

Online loans – Although most loans are available online. The Internet has allowed the development of technology that allows faster processing of loan applications than traditional methods. In some cases, the loan application, agreement, and funds that appear in your account may take only 15 minutes or less.

P

Loan up to salary – Short-term cash advance of up to 31 days, which is paid at your next salary. Payday loans come with a high APR due to the shorter loan term.

Payment Protection Insurance (PPI) – Insurance to cover the repayment of the debt if the borrower is unable to maintain his repayment for any number of reasons, including redundancy, illness or accident.

Personal loans – A total loan for all purposes and in different amounts, which can be granted to an individual on the basis of their credit history.

Price for risk – Lenders already have a set of interest rates, which are selected based on the credit rating of individuals. A person with a bad credit rating is considered to be at high risk and will probably be offered a higher interest rate, as the Lender takes into account the possibility that they will not fulfill their obligations when repaying. Conversely, a person with a high credit rating and a good credit history is considered low risk and will be offered a lower interest rate.

Question:

Qualification criteria – The eligibility requirements required by the Lender. The most basic criteria required for a UK loan qualification are; permanent residence in the United Kingdom, aged 18 or over and regular income. Many lenders may include additional lending terms.

R

Regulated – financial ‘products’ controlled by the Financial Conduct Authority (FCA). Lenders must follow a code of conduct and individuals are protected by the Financial Services Compensation Scheme (FSCS).

Repayment schedule – The period of time during which a loan will be repaid and details of the loan repayment amounts.

C

Second charge – A second loan, in addition to any other loan that is secured against the property of an individual.

Secured loan – Also known as a Homeownr loan. A secured loan is only available to homeowners. The loan amount is secured against the value of the property. The lender has the right to return your property if you fail to repay the loan.

Shared property – An agreement in which an individual owns only a percentage of the property. The remaining percentage is owned by a third party, often a housing association. An individual can have a mortgage on the part of the property he owns and pay rent on the part of the property he does not own.

t

A total amount is refundable – The total amount of the loan plus interest and all applicable fees.

Typical APR – The advertised interest rate, which is offered to a minimum of 66% of successful loan applicants.

U

Signing – The process of data verification and loan approval.

Unregulated – Not covered and regulated by the Financial Conduct Authority (FCA).

Unsecured loan – A loan that does not require collateral and is provided in good faith. Under the Lender’s belief that you can repay the loan based on your credit rating, credit history and financial condition among other factors.

V

Variable speed – Interest rate that will change during the loan repayment period.

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