Loan agreements and credit applications can contain unfamiliar language. This glossary explains the terms you are most likely to encounter when comparing, applying for or repaying a personal loan.
A
Affordability check
Applying- An assessment of whether you are likely to manage the repayments without being placed under unreasonable financial pressure. Income, spending and existing commitments may be considered.
APR
Loan costs- APR means Annual Percentage Rate. It presents interest and certain charges as an annual percentage, helping you compare the cost of different credit products.
A to C
Arrears
Repayments- Money that should already have been paid. Your account enters arrears when you miss all or part of a scheduled repayment.
Credit broker
Applying- A business that helps customers find credit from lenders or other brokers. A broker does not normally provide the loan itself.
CCJ
Credit files- A County Court Judgment may be registered in England and Wales when a court orders someone to repay money they owe. Scotland and Northern Ireland use different court processes.
Credit agreement
Applying- The legal agreement between a borrower and lender. It should explain the amount borrowed, interest, charges, repayments and other important conditions.
Credit file
Credit files- A record containing information about your credit accounts, payment history, searches and certain public records. It is also called a credit report. How to Check Your Credit File for Free
Credit reference agency
Credit files- A company that collects and supplies credit information. The three main UK credit reference agencies are Equifax, Experian and TransUnion.
Credit score
Credit files- A number used to indicate credit risk. There is no single universal UK credit score. Credit reference agencies and lenders can calculate scores differently.
Creditor
Repayments- A person or business to which money is owed. A lender becomes your creditor when it provides a loan.
D to I
Default
Credit files- A serious breach of a credit agreement, usually after payments have been missed. A default is not the same as being a few days late with one payment.
Early repayment
Repayments- Paying some or all of a loan before the agreed end date. This may reduce future interest, although an early repayment charge can sometimes apply. Can You Repay a Loan Early?
Eligibility check
Applying- An initial check estimating whether you might meet a lender’s requirements. It does not guarantee that your full application will be accepted.
Fixed interest rate
Loan costs- An interest rate that stays the same for an agreed period. This can make scheduled repayments more predictable.
Guarantor
Applying- Someone who agrees to make the repayments if the borrower does not. Acting as a guarantor creates a serious financial commitment.
Hard search
Credit files- A credit search normally recorded when you formally apply for credit. Other lenders can see it. Several applications over a short period may affect lending decisions. Soft Search vs Hard Search Explained
Interest
Loan costs- The price charged for borrowing money. It is normally shown as a percentage of the amount owed.
L to R
Lender
Applying- The business that provides the money, makes the lending decision and enters into the credit agreement with the borrower.
Loan term
Repayments- The period over which the loan is scheduled to be repaid. A longer term can reduce each repayment but may increase the total cost. Choosing the Right Repayment Term
Principal
Loan costs- The original amount borrowed before interest and charges are added.
Representative APR
Loan costs- The advertised APR that at least 51% of customers entering into agreements resulting from the promotion are expected to receive or beat. It is not a guaranteed rate for every applicant. Understanding APR and the Total Cost of a Loan
Repayment
Repayments- Money paid towards a loan. A repayment can include part of the amount borrowed, interest and any applicable charges.
S to V
Secured loan
Applying- Credit secured against an asset, commonly a home. The asset may be at risk if repayments are not maintained.
Soft search
Credit files- A credit check that is not visible to companies checking your report. It can be used for eligibility checking without leaving a hard application search.
Total amount repayable
Loan costs- The full amount scheduled to be repaid if the agreement runs as planned. It includes the money borrowed, interest and applicable charges.
Unsecured loan
Applying- A loan that is not secured against a specific asset. Approval and pricing normally depend on factors including affordability and creditworthiness.
Variable interest rate
Loan costs- An interest rate that can change. Check the agreement for an explanation of when and why the rate may be altered.
Before agreeing to a loan
Do not judge a loan by its monthly repayment alone. Check:
- The amount borrowed
- The APR
- The repayment amount
- The number of repayments
- The total amount repayable
- Charges for missed or early payments
Ask the lender to explain anything you do not understand before you accept the agreement.
Important information
LoansForBadCreditUK.co.uk is a credit broker, not a lender. Approval is not guaranteed. The lender will confirm the actual rate, repayments and terms offered following its assessment.
This glossary provides general explanations. The meaning of a term in a particular agreement will depend on the wording of that agreement.