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Loan Jargon
Applying for a loan is a nerve racking experience no matter how you look it, and the average person can get lost in the amount of loan jargon that their loan officer throws at them when they are sitting there getting ready to sign paperwork.
Here is a quick list of loan terms that are easy to understand and hopefully helpful when you go to get your next loan.
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AER - Annual Equivalent Rate or the interest percentage offered on a savings account
Adverse credit - a poor credit record that includes things such as CCJs, late or missing payments, and bankruptcy
APR - Annual Percentage Rate or the interest percentage offered on a loan
Bankruptcy - a court ordered condition when a person cannot pay their debts that wipe their debt clean Base rate - the lowest interest rate a lender will charge interest on a loan at Cancellation period - the amount of time a person has to cancel a contract after they sign it if they change their minds
CCJs - County Court Judgements which are issued to a person for failure to pay a debt that can be enforced by the seizure of property in the home by a bailiff
Credit rating - the point system used by financial institutions to determine whether or not you are a good credit risk
Debt consolidation - the combing of all your outstanding debt into a manageable single payment
Debt management - the process of getting your debt under control and paid off, usually through some form of debt management plan Fixed rate - the interest rate on a loan that never changes over the life of the loan
Flexible rate - a loan with a flexible credit limit and repayment terms, but it comes with a high interest rate
Gross income - the amount of money you earn from a job before any deductions are made
Guarantor - the person who agrees to guarantee the debts of another person and is commonly referred to as a co-signer
Inflation - the rise in prices for goods on an annual basis
Interest rate - the percentage rate that is charged on a loan
IVA - Individual Voluntary Agreement , which is a formal arrangement between you and your creditors for easy repayment terms Liabilities - the debt you owe your creditors Loan - the advance of money to a person from a lender to a borrower that is repaid over a set length of time
Secured loan - a loan that you obtain from a lender that is guaranteed by your property as collateral
Unsecured loan - a loan that you obtain from a lender that does not require collateral and comes with a higher interest rate Student loan - a loan taken out by students to pay for further education classes
While there are many other terms and words used in the financial markets that are confusing to the average person, these are the ones that you will need to know on an everyday basis. If you know these terms, then you will easily understand what your lender is referring to when you go to get your loan.
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