Loans glossary

Understand the loans jargon

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Confused by the sheer volume of borrowing jargon? Our loans glossary is here to help

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Acceptance rate - This is the percentage of customers who are successful in their application for loan or credit card. At least 66% of successful applications have to be offered the advertised rate, known as the typical APR (see Typical APR).

Annual percentage rate (APR) - The APR indicates the real rate of interest payable over a year once fees, charges and admin costs are factored in. This enables consumers to compare deals more easily and lenders are legally required to display the APR under the Consumer Credit Act.

Arrears - Failure to keep up with loan or mortgage repayments results in an account being in arrears. The borrower has a financial and legal obligation to repay the arrears to the lender, be it an institution or a private individual.

Arrangement fee - Usually associated with mortgages, this fee covers the administration costs of setting up a loan.


Car loan - A personal loan that is used to purchase a car.

Consumer Credit Association (CCA) - The CCA represents the majority of businesses in the home credit industry, and 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. Members must sign a constitution, a code of practice and a business conduct pledge.

County court judgement (CCJ) - A CCJ is issued by a County Court to a person who fails to pay an outstanding debt. An unsettled CCJ will affect an individual’s credit rating and may result them being refused credit. CCJ details remain on a person’s credit file for seven years. 

If the debt is fully settled within 30 days of the date of the judgement, it will not be listed on the credit register.

Credit file - Information relating to an individual’s credit and borrowing arrangements. Details are held with the credit reference agencies: Experian, Equifax and TransUnion. Lenders refer to a person’s credit file when assessing a borrowing application.

Credit search - Before processing your application a lender will contact the main credit reference agencies to obtain details of your credit history and any existing credit agreements you may have.



Debt consolidation - This is when you transfer existing debts onto a single loan or credit card.

Default - The failure of a borrower to keep up with loan repayments. Defaults adversely affect an individual’s credit score and reduce the chance of future successful credit applications.

Data Protection Act - A law protecting an individual’s personal information. Lenders are not allowed to pass a person’s details onto another institution without their permission.



Early redemption charge - A penalty fee levied by lenders if a borrower redeems a loan or mortgage within a certain period of time.

Equity - The value of a property once any debts secured against it have been repaid. This is the amount of money an individual would receive if they sold their house after the mortgage and any secured loans had been repaid.



First charge - An individual’s main mortgage. A lender with first charge over a property has a first call on any funds available from the sale of the property.

Fixed rate - A set rate of interest that cannot fluctuate.



Homeowner loan - Also known as a secured loan, a homeowner loan is available only to individuals who own their own home. The value of the debt will be secured against the property.



Joint application - An application made by more then one person, for example, husband and wife.



Lender - The company advancing a loan.

Loan purpose - The reason for which the loan is required.

Loan term - This is the length of time that you choose to pay your loan over.

Loan to value (LTV) - Usually associated with mortgages and expressed as a percentage, this is the loan amount in relation to the value of the property it is secured against. For example, someone needing wanting a £90,000 mortgage to purchase a £100,000 house would be borrowing 90% LTV.


Monthly repayments - The amount paid on a monthly basis to the lender in order pay off a loan and interest.

Mortgage - A loan taken out to purchase a home or to pay for your existing home, where the property is used as security for the lender.



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.

Payment protection insurance - Insurance to cover loan, mortgage or credit card repayments in the event of you being unable to work due to redundancy, ill health or an accident.

Price for risk - Many lenders now charge different rates of interest depending on the borrower’s credit score. Someone with a low credit score is regarded as high risk because they are more likely to default on their repayments than someone with a good credit score and strong credit history. Consequently, they will be charged a higher rate of interest.



Qualifying criteria - The eligibility requirements demanded by the lender. Standard criteria required in order to qualify for a loan include being a permanent resident of the UK, over the age of 18 and in receipt of regular income. However, many providers will attach additional lending conditions.

Quick search -’s search facility which displays all the products that fit the criteria a person enters. It does not factor in a person’s credit history.



Regulated - Financial products that are covered by the Financial Services Authority. Providers must adhere to a code of conduct and consumers are protected by the Financial Services Compensation Scheme and can seek recourse for any problems relating to their product through the Financial Ombudsman Service.

Repayment schedule  - An agreement detailing how, and over what time period, a borrower will repay a loan.



Second charge - A loan, in addition to a mortgage, that is secured against the borrower’s property.

Secured loan - Also known as a ‘homeowner’ loan, a secured loan is available only to individuals who own their own home. The value of the debt will be secured against the property. Your home could therefore be at risk if you fail to keep up with repayments.

Shared ownership - An arrangement whereby an individual only owns a percentage of the home they live in. The remaining share is owned by a third party, often a housing association or social landlord. The individual has a mortgage on the portion they own and pays rent on the remainder.



Total amount repayable - The amount of the original loan plus all interest and fees.

Typical APR - The typical APR is the advertised interest rate that is offered to a least 66% of successful applicant. This means that up to a third of customers may be offered an interest rate different to the one they applied for.



Underwriting - This is the procedure of verifying data and approving a loan.

Unregulated - Not covered by the Financial Services Authority.

Unsecured loan - A loan from a financial institution that is not secured against property. The maximum an individual can borrow in this way is £25,000.



Variable rate - An interest rate that can fluctuate during the repayment term.


Moneysupermarket is a credit broker – this means we’ll show you products offered by lenders. We never take a fee from customers for this broking service. Instead we are usually paid a fee by the lenders – though the size of that payment doesn’t affect how we show products to customers.

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