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At Aspire Money, we understand that there are alot of confusing financial terms and jargon out there, so we've compiled an easy to use list below.
Adverse credit (also known as bad credit, impaired credit or poor credit) refers to a credit rating which shows a history of missing payments, and may include defaults and County Court Judgements (CCJs).
Application - Is the information you provide to us in order for you to be considered for a loan.
APR stands for Annual Percentage Rate and is used to describe the cost of borrowing money. All lenders calculate APR in the same way which allows you to compare different lending products.
Arrears are debts as a result of missed or late payments of a loan or other type of credit agreement. Falling into arrears can result in a poor or impaired credit history.
Please see adverse credit.
Bankruptcy is an option that can be considered if an individual cannot pay the debts that they owe. It is a legal process which can seriously harm your ability to obtain credit in the future.
The base rate is the interest rate set by the Bank of England for lending to other banks.
A CCJ is a type of court order in England, Wales and Northern Ireland that may be registered against an individual if they fail to repay money that they owe.
Cancellation/Cooling off period – Is a period of time following a purchase when you may choose to cancel the purchase.
Consolidation - Debt consolidation is a form of debt refinancing that means taking out one loan to pay off many other loans.
An institution, like a bank or finance company that grants loans or provides goods on the basis of hire purchase. There must be legal contract (Credit Agreement) between the borrower and the Creditor which sets out how and when the money is to be repaid. In the case of hire purchase it will grant the lender the right to claim back the asset if you fail to pay back the loan. See Lender.
A contract between you and a loan or finance provider which details the full terms and conditions and the total cost of your loan.
A check carried out by a lender to establish your credit worthiness. Arrears will be shown, along with details of your financial history, any adverse credit, electoral roll information and details of previous searches.
Your credit rating is a summary of the information found in your credit report.
Collateral – Is money or property which is used to guarantee that you will repay a loan.
A credit broker, does not lend money, it works with a number of lenders to source loan options for you.
Money owed to a lender or other financial institution.
Debt consolidation is a form of debt refinancing that means taking out one loan to pay off many other loans.
A debt management plan is a repayment plan which helps make unsecured debt repayments more affordable. A debt management company will normally negotiate with creditors on your behalf to reduce your monthly and total payments to a manageable level.
Defaults – Failure to repay a debt that you legally have to. Defaults may be registered with a credit reference agency and visible to other financial institutions.
The Financial Conduct Authority (FCA) is an independent organisation responsible for regulating financial services companies in the UK. The FCA has the power to take legal action against firms which fail to meet their standards.
Fees – Financial Services companies in the UK need to make you aware of any fees associated with the service or product they provide.
The amount of interest that is due in addition to the amount that you borrow. A fixed interest rate means that the amount of interest that you repay will remain the same for the duration of your loan.
The total amount of money you earn before tax.
A guarantor loan is a type of loan that requires someone to vouch for you to repay your loan, who has the capacity to make the repayments if you cannot. Having a guarantor is helpful if you do not have a good credit score or have not yet got any credit history. A guarantor is someone who will step in and make payments on your loan if you cannot afford to so that your account stays up to date.
A customer who owns the freehold on a property.
An Independent Financial Advisor (IFA) is a qualified professional that can offer financial advice.
An IVA (Individual Voluntary Arrangement) is a formal alternative to bankruptcy. It is supervised by a Licensed Insolvency Practitioner and the purpose is to enable you to reach a compromise with creditors concerning the repayment of debts. Usually only unsecured debt can be included in the arrangement.
A person who owns a lease on a house, but does not own the freehold.
A company that provides an unsecured loan or a secured loan. Loan brokers work with a number (a panel) of lenders in order to find you the best deal. See Creditor.
Money borrowed from a lender. Loans are typically unsecured loans or secured loans.
The reason why you wish to borrow money, e.g. a new car or debt consolidation.
Payments which have been missed on credit accounts, typically in the last 12 months.
Also known as credit insurance, credit protection insurance, or loan repayment insurance, is an insurance product that enables consumers to insure repayment of credit if the borrower dies, becomes ill or disabled, loses a job, or faces other circumstances that may prevent them from making a payment towards their credit.
Redemption penalties – Costs incurred if you decide to repay or settle a loan early. Some lenders may charge a fee if you decide to do this.
Repayments – The amount that you pay to the lender each month to pay back your loan.
This allows you to confirm how much you earn – you do not then need to provide three years accounts if you are self employed.
A settlement figure can be calculated at any stage of a loan and is the amount required to be repaid to terminate the agreement.
Someone who rents or leases the home they live in, this includes those living with parents and those living in council or housing association accommodation.
The period over which you wish to repay your loan.
This is the total amount of money that will be repaid if the loan is paid over the normal term, this will include interest charged and any fees.
How a lender determines your ability to repay your loan.
A loan from a financial institution which is not secured on any asset.
Variable rate interest changes during the lifetime of a loan. The reasons for change are outlined in the loan agreements and are usually linked to the associated cost of borrowing for the lender (the base rate).