It can always be daunting when you speak to any professional in the finance industry and they start talking in their ‘language’, which results in a puzzled look across your face and a consistent, head-nod every now and then. So we’ve pulled together a set of common phrases and words that you will come across when looking for the right lending solution for you finances.
The percentage of customers who are successful in their application for a loan or credit card.
Annual Percentage Rate (APR)
This is the real rate of interest payable over a year once fees, charges and admin costs are factored in. It allows you, the consumer to compare deals more easily. Look out for them on at the bottom of bank adverts on TV.
This form of loan allows you to purchase investments either for personal or business. Whether it’s a car, aircraft, boat or new company equipment (eg. Computers/Fleet of Vans, Machinery) to help push your business to the next level.
County Court Judgement (CCJ)
A CCJ is issued by a County Court to someone who fails to pay an outstanding debt. If you have an unsettled CCJ, this will affect your credit rating and can hinder you from having a successful loan. CCJ details remain on a person’s credit file for 7 years!
Anyone who has borrowed money or owns a credit card has a credit file. It is information related to you that shows your previous loans and credit card history. They are normally held with credit reference agencies such as Experian, Equifax etc. During the borrowing process, we would refer to your credit file to assess whether or not you’re suitable for the loan.
A form of loan that allows you to transfer all your existing debts into one single loan or credit card. We offer this as a service at Smart Money.
If you fail to keep up with loan repayments, you are called a default. They affect your credit score and can reduce your chances of a successful loan in the future.
Early Redemption Charge
You can be charged with a lenders penalty fee if you, the borrower, redeems a loan or mortgage during a certain time period.
The value of a property when all your debts secured against it, have been repaid. This is the amount of money someone will receive if they sold their house after the mortgage and secured loans have been paid.
A set rate of interest that cannot fluctuate during your lending time.
This loan format is also known as a secured loan since the loan is available only to individuals who own their home. The value of the debt will be secured against the property but it can increase the chances of you having your house repossessed if you don’t keep on top of your repayments.
Home Improvements Loan
This is a form of Personal Loan, created to allow you to improve your home lifestyle and increase the value of your property. If you’re looking to build an extension on your home, convert your loft or attic space, or perhaps re-landscape your garden, this is a loan for you.
The company advancing a loan for you.
Loan To Value (LTV)
Primarily associated with mortgages and shown as a percentage, an LTV amount is in relation to the value of the property it is secured against. Eg. If you needed to borrow £90,000 mortgage to purchase a £100,000 house, you would be borrowing 90% LTV.
A loan taken out to purchase a home or to pay for your existing property.
Payment Protection Insurance (PPI)
Should you be made redundant, ill or have an accident and you are unable to continue the repayment of your loan, mortgage or credit card, your PPI will cover you.
Price for Risk
The Price for Risk depends on your credit score. If you have a low credit score, you are a high risk for the lender, since you are more likely to default on your repayment, in comparison to someone with a good credit score and strong credit history. Consequently, you would be charged a higher interest rate.
Property Lending consists of bridging finance, development finance, interest-only mortgages, equity release or large property-based facilities. These types of loans are normally requested for large developments such as apartment blocks and high-value properties.
This is the time period detailing how much you will be repaying and over what time, to the lender.
As mentioned above, this can be called a ‘homeowner loan’ as the loan is secured against the borrowers home. You have to own a home to take out this form of loan.
A Typical APR is the advertised interest rate that is offered to at least 66% of successful applicants, meaning a third of customers may be offered an interest rate different to the one they applied for originally.
A loan which isn’t secured against your property. The maximum you can borrow for this loan is £25,000.