Top of the page

Loan Glossary

Author: Harry Jones And Facted Checked by : Shanie Capper
Last updated on : 1 December 2023

Here you’ll find all the different terms used in the quick loan industry and their meaning. Here at My Quick Loan, we always want to try and educate our customers so they know exactly what all the terms mean. This guide will hopefully do that for you.

TermDescription
Affordability AssessmentAn evaluation carried out by a lender to determine whether a borrower can afford the repayments on a loan.
AmortisationThe process of gradually reducing a debt through regular payments over a period of time.
Annual Percentage RateThe total cost of the loan per year, expressed as a percentage of the loan amount. It includes the interest rate and any additional fees or charges.
ArrearsA term used when payments are not made in time. If you are 'in arrears', you have missed one or more repayments.
Arrangement FeeA fee charged by a lender to set up the loan.
Bad CreditRefers to a poor credit history, which may make it harder to get a loan or other types of credit.
Balloon PaymentA large payment due at the end of a loan's term to repay all remaining principal and interest not covered by regular payments.
BankruptcyA legal status where an individual or business cannot repay their debts.
Base RateThe interest rate set by the Bank of England, which influences the interest rates offered by lenders.
Bridging LoanA short-term loan used as a temporary measure until long-term financing can be secured.
BrokerA person or company that arranges transactions between a buyer and a seller for a commission when the deal is executed.
CollateralProperty or other assets that a borrower offers a lender to secure a loan.
Compound InterestInterest calculated on the initial principal and also on the accumulated interest from previous periods.
Consolidation LoanA loan that combines multiple loans into a single loan, usually with a lower monthly payment and a longer repayment period.
Consumer Credit ActA law that provides for the regulation of consumer credit contracts in the UK.
Co-SignerA person who signs an agreement to pay a loan on behalf of someone else who is getting the loan, thereby guaranteeing the loan if the borrower defaults.
County Court Judgement (CCJ)A judgement for debt in England, Wales and Northern Ireland, which may be issued if you fail to repay money you owe.
Credit AgreementA legally-binding contract between a lender and a borrower that details the loan terms and conditions.
Credit History/ReportA record of a borrower's responsible repayment of debts.
Credit LimitThe maximum amount that a financial institution or other lender will extend to a debtor for a particular line of credit.
Credit ScoreA number generated by a statistical model which provides lenders with an assessment of credit risk based on your borrowing and repayment history.
CreditworthinessAn evaluation of a borrower's ability to repay a loan based on their credit history and financial status.
DefaultA term used when a borrower fails to keep up the repayments on a loan or credit agreement.
Default ChargesFees applied when you break the terms of the loan agreement, typically when you miss a payment.
Debt Management Plan (DMP)An agreement between a debtor and a creditor that addresses the terms of an outstanding debt.
Debt-to-Income RatioA personal finance measure that compares an individual's debt payment to his or her overall income.
Early Repayment Charge (ERC)A fee you might have to pay if you pay back some or all of a loan before an agreed time.
Equity ReleaseA way of unlocking the value of your home and turning it into a cash lump sum.
Financial Conduct Authority (FCA)The regulator for financial firms providing services to consumers in the UK.
Financial Ombudsman ServiceA UK agency that resolves disputes between consumers and financial companies.
Fixed-Rate LoanA loan where the interest rate is 'fixed' for a set period of time.
GuarantorA third party who agrees to repay the loan if the borrower fails to do so.
Individual Voluntary Arrangement (IVA)A formal agreement between you and your creditors to pay back your debts over a period of time.
Interest CapitalisationThe addition of unpaid interest to the principal balance of a loan, which increases the outstanding debt amount.
Interest-Only LoanA loan where the borrower only pays the interest on the principal balance, with the principal balance unchanged.
LienA legal claim or a "hold" on some type of property, whether personal or real property, making it collateral against monies or services owed to another person or entity.
Loan-to-Value (LTV)The size of a loan compared to the value of the property it's secured against.
MortgageA loan to finance the purchase of real estate, usually with specified payment periods and interest rates.
Negative EquityThis occurs when the value of an asset used to secure a loan is less than the outstanding balance on the loan.
OverpaymentPaying more towards your loan than the amount due.
Payment HolidayAn agreed period of time during which you can pause your repayments.
Peer to PeerA method of debt financing where borrowers and lenders bypass traditional financial intermediaries, usually through online platforms.
Personal LoanA type of unsecured loan, which means the debt isn't secured against an asset like a home or car.
PrepaymentPaying off a part or the entirety of a loan before its due date.
PrincipalThe original amount of money borrowed in a loan.
RefinancingThe process of getting a new mortgage to replace the original. The goal is to allow the borrower to have better terms and interest rate.
RemortgageThis is when you change your existing mortgage by either switching it to a new lender or by moving to a different deal with your existing lender.
RepossessionThe action of a financial institution taking ownership of property/assets that were used as collateral for a loan because the borrower failed to make payments.
Representative APRThe interest rate that at least 51% of a lender's customers receive.
Secured LoanA loan that is secured against an asset, often your home. If you fail to repay the loan, the lender can sell the asset to recover their money.
Second Charge MortgageThis is a second mortgage on a property which already has a mortgage. They are called second charge because if the borrower defaults, the first mortgage is paid off before the second one.
Shared OwnershipThis is a cross between buying and renting; aimed mainly at first-time buyers. You own a share and then rent the part you don’t own at a reduced rate.
Simple InterestInterest calculated only on the initial amount (principal) that you invested or loaned.
Soft SearchA credit check that does not affect a person's credit score.
Subprime LoanA type of loan offered at a rate above prime to individuals who do not qualify for prime rate loans.
TermThe length of time over which a loan will be repaid.
Unsecured LoansA loan that is not protected by an underlying asset or collateral. If the borrower defaults, the lender has no property or asset they can claim against the debt.
Variable-Rate LoanA loan in which the interest rate charged on the outstanding balance varies as market interest rates change.

Before taking a same day loan out always be mindful and understand all the terms in the contract.

..

Warning: Late repayment of payday loans can cause you serious money problems. For help, go to moneyhelper.org.uk.

Top