Depending on your circumstances some loans may be more beneficial to you than others. The following glossary defines some common loan terminology.
- APR stands for annual percentage rate. APR tells you the total amount of interest paid over the entire term of the loan.
- Base Rate is the lowest rate of interest a lender can charge. Base Rate value is decided by the Bank of England’s monetary committee.
- Credit Ratings are used to determine the risk involved when an individual applies for a loan. Your credit rating is based on information obtained from public records and financial institutions. To find out more about credit ratings visit the Credit Ratings page.
- Debt consolidation is combining several debts into one payment with the aim to cut monthly repayment fees.
- Endowment is a form of life assurance policy that pays off a lump sum on an interest only mortgage.
- Fixed Rate loans have the interest rate fixed for a pre determined length of time.
- Guarantors are people who promise to pay the debts of an individual if they fail to make the necessary payments.
- Hire purchase is a credit agreement where an individual takes the asset provided instantly and repays the value over a predetermined length of time. An initial deposit is usually required before taking the asset home.
- Interest Rates are charged to loans and paid out on savings accounts. Rates can vary depending on the base rate and kind of loan or savings account. To find out more about Interest Rates visit the Interest Rates page.
- Life assurance is a policy that is used to secure large financial commitments such as mortgages. If the holder dies capital is paid out to cover the outstanding payments.
- Mortgages are long term loans used to purchase property. In the event of payments not being met the property is surrendered to the lender. To find out more about mortgages visit the Mortgages page.
- Offsetting is when savings or the balance of a current account is used to offset repayments to a mortgage or debt. By offsetting repayments the borrower can pay off the sum sooner.
- Personal Loans are amounts that are commonly leant from a lender to a borrower to pay for a car, holiday, home improvements or holiday. Personal loans can be secured or unsecured.
- Re-mortgages are taken out by a borrower usually to achieve a better rate of interest.
- Secured loans use an asset, usually property, to minimise the risk involved. This benefits the borrower as they will receive a lower APR in return. To find out more about Secured Loans visit the Secured Loans page.
- Term Assurance policies are a form of life assurance that are agreed for a fixed period of time after which they expire.
- Unsecured Loans have a higher APR compared to secured loans as there is no security in the form of assets or property provided by the borrower.