Financial Terminology Jargon Buster A E

Financial Terminology Jargon Buster A E



Financial Terminology: Jargon Buster a​ - E
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​ £2,500, a​ credit card balance of​ £1,000 and a​ store card balance of​ £500 .​
These could all be consolidated into one loan of​ £4,000 .​
The purpose is​ usually to​ lower monthly repayments, through either lower interest rates on the new loan, or​ lower repayments from an​ extended repayment term, or​ both.
2 .​
Default
Non-payment of​ an​ account according to​ the terms of​ the loan agreement .​
If you are declared in​ default, your account may be subject to​ higher interest rate and other charges .​
Failure to​ keep up with repayments may result in​ the fact being registered at​ the two main consumer credit agencies in​ the UK- Experian and Equifax .​
This may reduce your chances of​ obtaining credit in​ the future .​
If the loan is​ secured against your home, your home may also be at​ risk.
3 .​
Deferred payment
Delayed payment .​
Also referred to​ as​ a​ deferred start, this facility allows you to​ delay the date on which the first repayment is​ due .​
The deferred period could be from one to​ three months, meaning a​ loan opened on the 1st January may not require repayments to​ start until 1st April.
4 .​
Deposit
The deposit paid towards the total price of​ the property, normally payable at​ exchange of​ contracts.
5 .​
Direct debit
Apre-authorized debit on the payer's account initiated by the payee .​
Most loan providers would require you to​ set up a​ direct debit to​ make the monthly repayments on the loan.
6 .​
Discounted rate
This is​ where the lender makes a​ guaranteed reduction off the standard variable rate for an​ agreed period of​ time .​
After the period ends, the borrower will go onto the Standard variable rate .​
often used by loan providers as​ an​ added incentive to​ apply for a​ loan.
7 .​
Drawdown date
The date when the contracts have been completed and the mortgage starts.
E
1 .​
Early repayment charge (ERC) / Early settlement penalty
The charge payable to​ some loan providers should the loan be repaid in​ full before the full term of​ the loan has expired .​
For example, an​ arranged loan over 36 months may incur an​ ERC if​ it​ is​ repaid after 24 months, or​ any point before the 36 months has been reached .​
The average ERC can amount to​ the equivalent of​ 2 months interest.
2 .​
Early redemption charges
Redemption is​ when the borrower pays off the capital and the interest on the mortgage and thus has full rights to​ the property .​
Early redemption fees are the charges incurred for paying off the mortgage early, either to​ buy the house outright or​ when you re-mortgage .​
Always ask about these before you take out a​ mortgage.
3 .​
Endowment
Endowments are life assurance policies with an​ investment element designed to​ pay off the outstanding capital on an​ interest-only mortgage .​
There are a​ few types of​ endowments, such as​ 'with profits', 'unitised with profits' and 'unit-linked' .​
in​ the 1980s, these were sold to​ customers by salesman who promised that they would be guaranteed to​ pay off the mortgage at​ the end of​ the term .​
This is​ not the case, and many endowment holders are having to​ bump up their premiums.
4 .​
Equity
In housing terminology, equity is​ the difference between the value of​ the property and the money owed on the property .​
So if​ the property is​ valued at​ £200,000 and you owe £150,000 on the mortgage, you have equity of​ £50,000 .​
If you sold at​ that moment, you would receive £50,000 .​
Should the value of​ the home be less than the mortgage outstanding then you are in​ negative equity .​
Not to​ be confused with the stock market use of​ the word equity, which is​ completely different.
5 .​
Exchange of​ contracts
In England and Wales (not Scotland), the point when both buyer and seller are legally bound to​ the transaction.




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