18 November 2019
Being in the industry of finance and personal loans, we understand that it can be very easy to be bogged down by all the different financial jargon out there. So, we thought we’d create a handy financial jargon buster, featuring some of the most common financial terms, what they mean, and where you might see them.
APR, or Annual Percentage Rate, is a percentage figure used to show the potential total cost of your borrowing over a full 12-month period when you are considering applying for a form of personal credit . Included within this total are other costs like upfront fees and associated interest rates. You can learn more about APR by visiting our blog on the topic here.
A CCJ, or County Court Judgement, is something that is issued by a County Court in response to a failure to repay an outstanding debt. A CCJ will have a negative impact on an individual’s credit rating, as it serves as an example of their being an unreliable credit risk, which in-turn means it can affect and restrict their future lending options.
A Consolidation Loan is a loan given to borrowers who already have numerous outstanding loans or other forms of personal credit. These consolidation loans are designed to act as a single repayment of all of these outstanding debts and they require just one repayment to be made each month, which makes it easier for an individual to manage their overall debt.
If the interest rate is favourable, such a loan could mean that less money is repaid each month than the total sum of the separate repayments for a person’s outstanding debts. However, if the loan is taken over a longer-term the total amount repayable for a consolidation loan could ultimately prove to be higher than the total sum outstanding for all of an individual’s separate personal debts.
A Credit Footprint is the ‘mark’ left on a person’s credit report, and each footprint acts as a record of an application for a form of credit that an individual makes. This footprint includes the name of the credit provider who was applied to, the date of the credit check, as well as the type of credit that was requested. The footprint does not however show whether or not the application was ultimately accepted.
A Credit Rating is a score issued and maintained by UK Credit Reference Agencies to measure your overall credit reliability and this is directly linked to and based-on your credit history. As such, this credit score is influenced by several key factors and you can learn more about both understanding and improving your credit rating, by reading our blog on how to improve your credit rating here.
Early Repayment Penalty
This is simply a list of initial requirements/exclusions that will determine if a potential applicant is suited to a particular type of credit and they are typically listed/asked before a full application for any form of credit commences.
First Charge Mortgage
A First Charge Mortgage is a large loan given to those who want to buy a house but cannot afford to make the full payment upfront for the property (as is typically the case for most people wishing to buy a house in the UK). The loan is secured against the property itself, meaning that the property can be repossessed by the bank if the borrower defaults on future repayments.
This is a method of borrowing used on expensive one-off purchase items; typically, this will be things like a sofa, a fridge freezer or a new car. What this means is that as the borrower you can ‘purchase’ the product by repaying the total sum owed each month, over a set period of time. You often may need to put down an initial purchase deposit sum for such hire-purchase agreements and there may be additional interest charges added to the initially quoted price of the product.
A Payday Loan is a short-term borrowing of small amounts of money which are required to be repaid by the applicant on or before their next payday. You can learn more about the Payday Loans that buffa offer here.
Personal (Unsecured) Loan
A personal loan is quite simply a loan that is not secured against the applicants property, and typically the maximum that can be borrowed under such circumstances is £25,000. Such loans require a regular fixed repayment figure across an agreed period of time, and the repayment dates will be fixed on a month to month basis.
A secured loan is typically for larger amounts than personal (unsecured) loans, and therefore as a form of security of repayment, lenders will secure the loan against an asset that is owned by the borrower. This asset will typically be the house owned by the borrower, meaning their home is at risk if they do not keep up with the loan repayments.
Hopefully this article has helped to clear up a few of those often heard and sometimes annoyingly confusing financial jargon terms. For some more detailed financial and debt information, you can visit our debt advice page for a range of different resources.