Financial Terminology: Jargon Buster A - E

Summary: A 1. Account holder The person who has a personal loan account. 2. Advance The mortgage loan itself is called the advance. 3. APR (Annual Percentage Rate) An interest rate designed to show you the total annual cost of getting credit. It should include all the interest and charges payable by you as a condition of taking the loan. Where taking Payment Protection Insurance is a condition of taking the loan, this should also be included in the APR.

A 1. Account holder The person who has a personal loan account. 2. Advance The mortgage loan itself is called the advance. 3. APR (Annual Percentage Rate) An interest rate designed to show you the total annual cost of getting credit. It should include all the interest and charges payable by you as a condition of taking the loan. Where taking Payment Protection Insurance is a condition of taking the loan, this should also be included in the APR. The typical APR is the APR that 66% of customers applying for the providers credit card can expect to get. 4. Applicant You become an applicant when you complete and submit an application form for a personal loan. 5. Applied or nominal interest rate The rate used to calculate the interest due on your mortgage. 6. Arrangement fee The fee payable to the loan provider by you (the applicant) to open the account. 7. Arrears Mortgage payments which have not been paid and are overdue. B 1. Bank of England base rate The Bank of England sets or reviews their interest rate on a monthly basis and this is the main factor influencing interest rates charged by mortgage and other lenders. 2. Buildings insurance Covers your actual building(bricks and mortar) and is usually required as soon as you exchange contracts on your house. C 1. Capital The amount you owe excluding costs and any interest outstanding. 2. Capital and interest mortgage This is when your monthly payments go to pay off the outstanding mortgage in addition to the interest on the mortgage. At the end of the term you will have no more to pay. Also called a repayment mortgage. 3. Capped rate This is a mortgage where a maximum interest rate is agreed which the rate cannot go above. This deal lasts for a set period of months or years. Should the variable rate go below the maximum, the pay rate falls with it. 4. Cashback An amount, either fixed or a percentage of a mortgage, which you can opt to receive when you complete your mortgage. The lender will likely claw back this money through a higher interest rate. 5. Charge-off The removal of an account from a loan provider's books. When an account is charged off, the loan provider absorbs the outstanding balance as a loss. Charge-off is also referred to as Write-off. 6. Closing administration charge A final charge made by the lender to cover their administration costs when a mortgage is fully repaid. 7. Completion This is end of the mortgage process, when the contracts are signed, all questions have been answered and the keys are handed over and the funds transferred. Happy moving! 8. Consumer Credit Act (CCA) The Act which defines how personal loans may be advertised, and what rules need to be followed by loan providers in the presentation of loan features such as the interest rate and typical APR that are applicable. The Act also covers the information that needs to be available to the consumer such as product terms and conditions. 9. Contents insurance Insurance that covers your personal belongings 10. Contract A contract is a binding agreement between two and more parties. In the context of house buying, a contract is signed by both the buyer and the seller and then 'exchanged' between the respective solicitors, at which point the house sale is binding on both sides. 11. Conveyancing The legal work involved in the sale or purchase of land. 12. Credit Reference Agency (CRA) An agency that gathers and maintains information on the debts and repayment records of individuals and businesses. CRAs prepare reports that are used by personal loan providers to view an applicant's credit history. There are two such agencies for consumer credit in the UK - Experian and Equifax. 13. Credit scoring The process by which your credit worthiness is checked. Weights or 'scores' are associated with your personal attributes, such as your income and the time spent at your current address. These 'scores' are added to give a total credit score. Each total credit score is associated with a prediction of how likely a person with that score is to default. The loan provider then checks this score against the minimum required to be accepted for their loan, determining whether they accept you or not. D 1. Debt consolidation The process of combining all outstanding debts in one loan account. For example, you may have an existing loan with a balance of