We know that banks like to scare people with a lot of technical jargon. We have provided below a list of the most common terms and explained them in ‘real English’.
Some lenders charge a fee for the administration of paper work and administrative time in dealing with a loan application. ‘Application fees’ are also commonly referred to as ‘establishment fees’. Such fees are required to be disclosed by law.
An account in arrears is an account which is overdue and at the present point in time has not been paid.
When an individual or a company is unable to pay its debts, bankruptcy is declared. This is a formal legal status declared by the Courts.
An individual who borrows money from another institution or individual.
Loan used for business purposes. Business loans often have different terms, including interest, charges, security and repayment profile, when compared to personal loans.
A charge over property creates a legal right over property as security over the debt of a borrower. Charges can be fixed (charge over a specific asset) or floating (charge over a collective group of assets). Charges are registered with the PPSR (Personal Property Securities Register).
Security offered by a borrower to a lender in the event of a debt not being repaid.
A comparison rate shows the true cost of a loan, factoring in all interest, fees and other charges. It is used as a direct comparison between other loans, as the calculation for a comparison rate is done on a ‘like for like’ basis.
An area of finance involved in lending money to consumers.
Interest is calculated on a daily basis and added to the loan (when borrowing) or added to the savings balance (when saving).
Daily interest rate
Interest is calculated on a daily basis.
Similar to a credit card, although purchases cannot be made on credit; all purchases can only be made with available funds from a consumer’s bank account.
An individual or company who owes money.
An instruction with a bank for the deduction of funds from a client’s account on a regular basis for the payment of goods or services.
See ‘application fee’.
An individual who is legally responsible for the repayment of another person’s debts.
A loan whereby the borrower has an individual (a guarantor) who will make repayment of the loan in circumstances where the borrower is unable to make repayments.
An agreement to pay for any damage or loss caused by the other party.
The charge a lender imposes for the use of funds.
National Consumer Credit Protection Act 2009. National legislation enacted to afford more protection to individual consumers borrowing money.
Credit reporting that detracts from a credit score. For instance, if an individual has defaulted on a loan, this will be considered negative reporting and will detract from the overall credit score.
A facility offered by a bank for short term funding gaps in your bank account, whereby the bank will lend money to its customers who hold a bank account with them for a short period of time.
Loan for personal use, as distinct from commercial use.
Credit reporting that improves a credit score. For instance, when an individual repays a loan, this will be considered positive and will improve the overall credit score. Positive reporting is the opposite to negative reporting, as described above.
The amount of money which has been borrowed, excluding any interest or fees.
The revision of a repayment schedule for the repayment of a debt. This can be through taking out a new loan, or changing the terms of an existing loan.
A loan which has security attached to it. The security can be in many forms, such as a house or car, and is used by the lender to either take possession of or sell for cash in the event the borrower is unable to repay the loan. A secured loan is often referred to as a loan with collateral.
A fee charged by banks on its banking products.
A loan where no security or collateral is required. An unsecured loan is the opposite to a secured loan, as described above.
Fees charged by a lender in relation to the paperwork and administrative time involved in processing a loan application.