Personal finance terms - Understand the jargon

When you first apply for personal finance, it can be difficult navigating complicated financial terms. We explain everything you need to know in our A - Z list of definitions below:



Acceptance rate - This is the percentage of customers who are successful in their application for loan or credit card. At least 66% of successful applications have to be offered the advertised rate, known as the typical APR (see Typical APR).

Annual percentage rate (APR) - The APR indicates the real rate of interest payable over a year once fees, charges and admin costs are factored in. This enables consumers to compare deals more easily and lenders are legally required to display the APR under the Consumer Credit Act.

Arrangement fee - Usually associated with mortgages, this fee covers the administration costs of setting up a loan.


Borrower - The person taking out the personal loan. Borrowers are required to repay the loan according to the terms laid out in the lender’s contract.

Broker - The organisation responsible for arranging a personal loan between the borrower and the lender.


Credit - The amount of money a borrower has available to borrow. Also referred to as creditworthiness.

Collateral - Assets that are pledged to the lender as insurance for the money borrowed. Used for ‘secured loans’.


Debt consolidation - This is when you transfer existing debts onto a single loan or credit card.

Default - Failure to repay a loan by the scheduled repayment dates. Also referred to as ‘defaulting on the loan’.

Due diligence - The efforts and activities lenders undergo when considering applicants for affordability and meeting lending requirements.


Early repayment fee - An amount of money that some lenders charge if you want to pay your loan off earlier than originally agreed in the loan terms.

Eligibility criteria - The requirements a person needs to meet in order to be eligible to receive a personal loan.

Equity - The value of your personal assets (like your house), against the amount of money you borrow.


Fixed interest rate - The rate charged remains the same for the duration of the loan term, which means monthly payments won’t change.

Financial Conduct Authority - The UK financial regulator for the financial services sector. Responsible for protecting consumers and setting criteria for lending.


Grace period - The period of time in which the borrower has to delay payment before incurring a fine or penalty.

Guarantor - A friend or family member who legally accepts responsibility for your loan repayments if you miss your payment deadlines.


Hard credit check - A hard credit check is a search of your credit file which will be recorded on your credit report.

Homeowner loan - Also known as a secured loan, a homeowner loan is available only to individuals who own their own home. The value of the debt will be secured against the property.


Interest rate - An amount of money which is paid regularly at a percentage rate for the use of borrowing money from a lender.




Late fee - A fee incurred if you miss a scheduled payment date over the course of your loan term.

Lender - The provider responsible for issuing the personal loan.

Loan purpose - The reason for choosing to take out a personal loan.


Monthly repayments - The amount of money you are required to pay back each month at scheduled dates.





Quote - The estimated price for a personal loan. All lenders issue their own quotes which can differ from the representative APR stated.


Repayment schedule - An agreement detailing how, and over what time period, a borrower will repay a loan.

Regulated - Financial products that are covered by the Financial Services Authority. Providers must adhere to a code of conduct and consumers are protected by the Financial Services Compensation Scheme and can seek recourse for any problems relating to their product through the Financial Ombudsman Service.


Soft credit check - A soft credit check is an initial search of your credit file which will not be recorded.

Secured loan - A secured loan, also referred to as a ‘homeowner loan’, is a long term funding product that lets you borrow money against your personal assets. In order to be able to access the loan, the equity of your assets or property is taken into account as security against your repayments.


Terms - The amount of time you have to repay the loan. Loan terms can range from months to years, depending on the financial product you choose.


Unsecured loan - A type of consumer finance. It is ‘unsecured’, which means that it does not require any type of collateral. This type of loan is the most popular form of personal finance, as it allows borrowers to receive money without risking valuable personal assets.


Variable rate - Unlike a fixed interest rate, a variable rate can change over the course of the loan repayment term.





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Representative 49.9% APR

Representative example: Amount of credit: £1200 for 18 months at £90.46 per month. Total amount repayable of £1628.28 Interest: £428.28. Interest rate: 49.9% pa (variable). 49.9% APR Representative. Rates from 45.3% APR to 1721% APR - your no-obligation quote and APR will be based on your personal circumstances. The minimum repayment period for any loan will be 90 days from the date the loan is issued. The maximum repayment period is 3 years.

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