Glossary

Extra money included in the monthly payment to help reduce the principal and shorten the term of the loan.

A provision that requires the borrower to pay the balance of the loan in a lump sum after the property is sold or transferred.

A USA term which means paying a regular sum (usually monthly) plus interest over a fixed period of time, so that the debt (usually a mortgage) is completely eliminated by the end of the term.

This is an indicator used to compare interest rates. It takes into account the costs involved in setting up the mortgage, any discount periods, how often interest is calculated and calculates what the average rate of interest will be over the life of the loan. All lenders that comply with the consumer credit act must ensure that the borrower is informed of the APR. It will apply to both a Homeowner Loan and an unsecured loan.

A document detailing a potential borrower's income, debt and other obligations to determine credit worthiness.

Salesperson, company or organisation that advises on the investment products specific to one life insurance or investment company.

This is an indicator used to compare interest rates. It takes into account the costs involved in setting up the mortgage, any discount periods, how often interest is calculated and calculates what the average rate of interest will be over the life of the loan. All lenders that comply with the consumer credit act must insure that the borrower is informed of the APR. It will apply to both a Secured Loan and an unsecured loan.

Arrears occur when the borrower misses one or a series of monthly payments. Arrears can lead to the repossession of the property.

This is charged on a monthly basis to cover additional administrative costs when your loan account is one or more monthly payments in arrears.

A form of income protection incorporating cover for loss of earnings arising from accident, sickness or unemployment. It is usually paid in the form of a monthly tax-free income to cover a portion of lost earnings and is usually restricted to two years from the date of the first payment. This is a sensible option if you are considering taking out a Homeowner Loan as your home may be at risk if you are unable to meet your monthly credit repayments.

Anything that a person or company owns that has a cash value including property, savings, stock, shares and personal possessions.

Automated Teller Machine known in the UK as a CashPoint, usually found at banks and building societies for withdrawing and depositing cash.

A term used to describe a poor credit rating from the credit reporting agencies (i.e. Experian or Equifax). Common practices that can damage your credit rating include making late payments, missing payments, exceeding card limits, entering into an IVA or declaring bankruptcy. "Bad Credit" can result in being denied credit.

An official representative of the courts, who may call round to repossess your possessions or house if you cannot keep up on your mortgage repayments and fail to reach an agreement with your lender to amend your repayments.

A mortgage in which monthly installments are not large enough to repay the loan by the end of the term. As a result, the final payment due is the lump sum of the remaining principal.

Moving the outstanding balance (debt) on one or more credit cards to another card usually to obtain a lower overall interest rate.

A proceeding in which an insolvent debtor can obtain relief from payment of certain obligations. Bankruptcies remain on a credit record for seven years and can severely limit a person's ability to borrow.

The rate of interest set by the Bank of England that is followed by almost all lenders and will influence variable rate loans in the UK.

This is a short term loan provided by a bank or building society which covers you if you need to pay for your next home, while still waiting for the money to come through from the sale of your current home. If you do require one of these, you must ensure that the funds to repay the loan will be in place when the loan period expires.

A Broker is an intermediary who offers policies / loans based on need from a 'panel' of providers. There are Brokers who will arrange both a Homeowner Loan and an unsecured loan. They are often the one who processes the loan.

BUILDING SOCIETY QUESTIONNAIRE: A questionnaire completed by a bank/building society or other lender providing details and conduct of an applicant's mortgage account.

Building societies are mutually owned organisations, which exist not for profit but for the benefit of the members. The idea of this is that the society is able to offer cheaper products to its members, though this is not always the case.

Buildings and contents insurance can often be purchased together protecting both the building structure and your belongings and possessions inside.

Payments contribute to both the interest on your mortgage and the capital you borrowed. At first your payments contribute largely to the interest, then in the later stages a higher percentage will be devoted to repaying the capital.

These are a set of standards proposed by the government aimed at ensuring a certain level of standard amongst financial products such as mortgages and ISAs. Whilst they are a sign that a lender or provider is a reputable business and offers products that are of a certain quality, a CAT mark does not ensure that a product is the most suitable one for you.

A document which shows that the bearer has a specified amount of money on deposit with a bank, stock-brokerage firm or other financial institution.

A CCJ or County Court Judgement is a judgement in the county court for the repayment of an outstanding debt. This debt does not appear in the credit register if this debt is settled within 30 days of the date of the judgement. Although many lenders are not willing to offer loans to anyone with an outstanding or unsettled judgement, there are however, a number of lenders that specialise in arranging credit for people with impaired credit such as CCJ's.

An association aiming to ensure that member firms are kept up to date with changing legislation and current trends within the profession, and to enhance the status and ethical standards of finance brokers.

A certificate from the Land Registry that shows the boundaries of a property and gives details of covenants affecting it.

Council of Mortgage Lenders. Building societies, banks and other lenders are members of this trade organisation.

An agreement that certain professions can sign up to in which they agree to act or serve in a certain way and which therefore protects the consumer in areas (such as estate agency) which are not regulated by an institution.

The property or other asset which the lender can sell to repay the loan if the borrower does not keep up the mortgage payments. In most cases, the home is collateral on a mortgage. If the borrower fails to repay the loan, the property will be repossessed.

Some lenders, at least for certain loans, insist that you take out payment protection insurance as a condition of the loan. You should strongly consider taking out payment protection when applying for a Secured Loan as your home may be at risk if you are unable to keep up with your monthly credit repayments.

Act of legislation to define the rules relating to lending money and aimed at protecting the consumer when credit is agreed with a third party.

A legal document between two parties confirming any sort of agreement such as terms of sale, employment or service.

The terms of a contract to which you must abide. There may be financial or even criminal penalties which incur if you do not meet your contractual liabilities.

A person, used as an alternative to a solicitor, to carry out the legal work involved in buying and/or selling a property. Note: It should be checked that they are licensed to carry out this function.

A person who assumes joint liability for a loan. The co-signer of a loan agreement is not necessarily, however, a co-owner.

An institution that sets out a code of good practice which mortgage lenders volunteer to stick to - they are not regulated by the government.

This is charged when a lender provides information to solicitors relating to county court rules when your loan repayments are in arrears.

In the context of insurance, cover describes the specific risk a given policy protects you against. Life cover protects your family against the financial consequences of your death, buildings cover against damage to the property that you live in.

A measurement of a person's ability to pay bills on time. Several companies track individuals' credit histories by detailing late or missed payments on loans, credit cards and other debts.

Companies used by UK loan providers who provide individual assessments of loan applicants in the form of a credit report.

An agreement between the lender and borrower outlining various terms and conditions. This will need to be signed before the borrower receives their loan.

When a borrower has a poor credit history, has previously been declared bankrupt or has outstanding County Court Judgements, they are often described as credit averse. People with averse credit ratings often have to pay higher interest rates on a loan or mortgage. Those with a poor credit rating, may find that taking out a Homeowner Loan as opposed to an unsecured loan will mean that they benefit from lower interest rates.

If you have a history of bad debts, county court judgements or bankruptcy to your name, you may not be eligible for a mainstream mortgage. To help ensure you are a good credit risk, a lender may require references from your existing lender, bank or landlord. In addition to this, many lenders will make use of the services of one of the two large credit agencies, Experian and Equifax. These offer a credit inquiry or a full credit application, which show details of any existing credit arrangements or county court judgements against you.

These private companies are used by loan providers to make individual assessments. They keep credit records of all individuals and businesses. The two main credit reference agencies in this country are Experian and Equifax.

Covers an individual for life or for a set period against a number of serious illnesses, diseases and medical conditions. It pays out a single tax-free lump sum on the diagnosis of one of the illnesses specified in the policy details. The most common of these included in a policy of this sort are: Heart attack, Stroke, Cancer, Kidney or liver failure paralysis and multiple sclerosis. AIDS is not usually included.

Interest on the Secured Loan is calculated and applied on a daily rather than a monthly or yearly basis. Can lead to big savings.

e.g. Switch card: money is taken from your bank account, usually on the same day you make a purchase.

Otherwise referred to as a Consolidation Loan, its is the combining and repayment of several debts by borrowing the amount owed through one new debt. It is often possible to reduce interest charges or monthly outgoings by doing this. Often savings are made by converting unsecured debts to secured debts. This however puts the asset used as security at risk if payments are not maintained in full. Interest rates on secured loans are often lower than for unsecured loans because there is a lower risk of non-payment to the lender.

A ratio used by lending institutions to determine whether a person is qualified for a mortgage. Debt-to-income is the total amount of debt, including credit cards and other loans, divided by total gross monthly income.

Applies to payment protection policies and is the length of time after you are unable to work or make the claim before you can start to receive insurance payouts. Typically this ranges from <