Jargon Buster

Advance

The 'advance' is that finance companies call the amount of money you want to borrow.

Agreement in principle (AIP)

This is an agreement from your loan provider to lend an amount of money. The value depends on the value of your property, proof of your identity, income, existing credit commitments and credit repayment history. This is an indicative decision only and is dependent upon your ability to meet the lender's lending policy.

APR (Annual Percentage Rate)

The cost of credit at a yearly rate. Knowing the APR allows you to effectively compare loans, even when they are structured differently.

Arrears

The term 'in arrears' is used to describe a loan account owed by the borrower if they have not kept up the monthly repayments.

Balance Outstanding

The amount of loan owed at a particular time.

Bankrupcy Order

A process of legally declaring inability to repay debts, and providing protection for the debtor. Bankruptcy orders are kept on record for six years from the date of the bankruptcy.

Budget (Financial Statement)

A Budget is a document listing details of income and expenditure.

Budgeting

The process of managing outgoings so that they don't exceed income.

Charge

An interest in the ownership of a property; usually a mortgage or a secured loan, which is secured against the property.

Conveyancer

A person other than a solicitor who may conduct the conveyancing.

Conveyancing

The process of transferring property from one party to another, usually managed by a solicitor or a licensed conveyancer.

Consumer Credit License

A License issued by the Office of Fair Trading issued to those businesses operating in the consumer credit industry. The licenses are issued under The Consumer Credit Act as part of the rules for the granting and enforcement of credit and to protect those who purchase goods or services on credit terms, or who seek loans.

County Court Judgment (CCJ)

A decision or judgment from a County Court which can relate to non-payment of debts. If you pay off the debt, the CCJ is satisfied and a note is put on your records to say so.

Credit

The process of allowing a customer to purchase goods or services on the promise of future payment.

Credit History

A record of how a consumer has paid credit accounts in the past. It is used as a guide to determine whether or not the consumer is likely to pay future accounts on time.

Credit Line

The amount of credit issued by a lender.

Credit Rating

A score and an analysis of the information contained within your credit report. Each piece of information in your report is given points based on how it compares to people who pay their bills and loans on time. The more positively it compares to these people, the higher your score and overall credit rating becomes.

Credit Reference Agencies or Credit Bureau

Organisations licensed under the Consumer Credit Act 1974 to hold information about the credit history of individuals. Lenders refer to these agencies to assist in making decisions about your application. Equifax is one of the UK's leading credit reference agencies, for example.

Credit Repair Agencies or Credit Clinics

Companies that claim they can "clean up" or "erase" a consumer's bad credit.

Credit Report

A record or file used by a prospective lender or employer that chronicles the credit standing of a prospective borrower. It is used to help determine creditworthiness of the potential borrower.

Credit Risk

The likelihood of a consumer to pay back an outstanding debt.

Credit search

A check the lender makes with a specialist company to find out whether you have any County Court Judgements or a record of not paying loans, credit-card bills etc.

Credit Scoring

The system many Lenders use to help them decide whether they can lend money to you. They'll ask a series of questions about you and your finances and score your answers. Your score will result in you being accepted or declined a loan.

Credit worthiness

An assessment of a consumer's past credit behaviour that allows a potential lender to decide whether or not to extend credit.

Creditor

Someone to whom you owe money.

Debt Consolidation

The process of combining outstanding debts e.g. loans, credit cards etc, into one loan. Many customers consolidate their existing debts with a debt consolidation loan. This is also sometimes called a secured loan or a homeowner loan.

Default

Failure to pay a debt.

Delinquency

Regular late payments by a debtor on monthly payments, or on trading accounts.

Direct Debit

A Direct Debit is an instruction from a customer to their bank or building society to make regular payments direct from their account.

Discharge

Paying off a mortgage.

Early Repayment or Settlement Charge

A charge payable on some loans and mortgages if they are repaid early. The amount depends on the loan outstanding and its terms.

Equity

The difference between the market value of your house and the amount outstanding on your mortgage. If, for example, your outstanding mortgage is £90,000 and your home is worth £100,000, you have equity of £10,000.

Equity release

Equity release schemes give home owners a way to turn some of the value of their homes into cash. Either a lump sum, regular extra income, or sometimes both.

Fees

Charges made by a financial institution for their services.

Financial Services Authority (FSA)

The regulatory authority for the UK financial services industry. The FSA has taken over the regulation of mortgages. All lenders and mortgage intermediaries must be directly authorised and regulated by the FSA or an appointed representative of an authorised firm.

Homeowner

A person who owns their home with a mortgage.

Homeowner loan

A homeowner loan is also sometimes called a secured loan.

Identity Theft

A fast-growing crime that occurs if someone steals your name and other personal information for fraudulent purposes. Identity theft is a form of identity crime (where somebody uses a false identity to commit a crime). Most commonly, this term relates to cheque or credit card fraud although mortgage fraud and other kinds of financial fraud are common. Less commonly, it is used to enable illegal immigration, terrorism or espionage.

IFA

Independent Financial Advisor.

Joint Loan Agreement

A loan where there is more than one named individual responsible for the contract.

Loan to Value (LTV)

The amount of mortgage expressed as a percentage of the property value. For example, if your mortgage amount was £160,000 and your property is valued at £200,000 your loan to value, or LTV, is 80%. Some lenders enable you to borrow up to LTV125%, less your first mortgage. This type of secured loan could offers you the option of borrowing a larger sum than traditional loans. Subject to agreement.

Negative Equity

When the value of the mortgage, which is outstanding on the property, is more than the market value of the property.

Ombudsman

An independent professional body which is set up by law to help settle individual disputes between consumers and firms such as estate agents, solicitors and insurance companies.

Premium

The amount you pay regularly, monthly or annually, to an insurer for an insurance policy.

Remortgage

The process of moving your mortgage without moving home. You take a new mortgage with a different lender to pay off your old mortgage.

Search

The name and address of an individual being submitted to a credit search agency (for example, Equifax) in order to obtain information held on their databases regarding the individual's identity and financial performance and behaviour.

Secured

A secured loan is guaranteed by your property (includes assets such as Title Deeds to your house, life policies, etc). If you don't repay your mortgage or other secured loan, the lender has the right to sell these assets. A secured loan is sometimes also called a debt consolidation or homeowner loan.

Sequestration

The term used is Scotland equivalent to Bankruptcy in England and Wales.

Solicitor

Legal expert handling of all documentation for the sale and purchase of a property.

Subject to Contract

Words to indicate that an agreement is not yet legally binding.

Tenants

People living in a property paying rent - they are not the property's owners. Secured loans are not available to tenants.

Term

The period over which a loan is scheduled to be repaid.

Total Amount Payable

The total cost of repaying a loan or mortgage.

Unsecured Loan

A loan provided to a borrower without them having to provide any security such as a charge over their house. Because the risk to the lender of not getting their money back is higher for unsecured loans than for secured loans, the interest rate charged is often higher. Unsecured loans are also sometimes referred to as personal loans.

Valuation

In most instances this is the figure that a surveyor will come to regarding the price of a property. This is done to ensure that the property is worth the amount requested for a mortgage.

Valuation Fee

The charge for the valuation of the property.

Variable Interest Rate

Rate of interest payment that fluctuates over time with general interest rates.

Vendor

The seller of a property or piece of land.

Voluntary Arrangement

All of an individual's creditors agreeing jointly to the arrangements for repayment and forgiveness of a debtor's obligation in an effort to avoid an Order of Bankruptcy.