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A

APR

When you borrow money, every lender is required by law to quote this rate. Always insist on being told the APR, it's the best way of comparing like with like. If a lender can't tell you, find another one - they're probably a bit seedy or even a loan shark! The APR was introduced as part of the Consumer Credit Act of 1974.

The headline quoted rate on a mortgage or a credit card states the rate of interest you pay per month or per year, but it's the APR figures (usually shown in brackets) which calculates the total amount of interest that will be paid over the whole term of the loan. The APR should also take into account any charges which the borrower has to pay. So, if you see a 'too good to be true' mortgage offer, where the loan is fixed at a surprisingly low rate for 1 year, bear in mind, after the fixed period has ended, the interest rate will almost certainly revert to the current variable mortgage rate for the remainder of the loan, which may be another 24 years!.

The net result is the APR will be much higher than 3%.

Application Fee

Fees that are paid upon application.

B

Bankrupt

A corporation, firm or individual is described as being 'bankrupt' when they are relieved from paying all debts once their assets have been surrendered to an appointed third party. Bankruptcy proceedings are managed via the court system, with the appointed third party designated by the court in charge of the proceedings, in accordance with the Insolvency Act. A supervisor is appointed to receive a bankrupt person's earnings. The bankrupt is permitted to receive an allowance on which to live with the balance being reserved for the benefit of his or her creditors.

A bankrupt person is not permitted to hold a bank account or apply for credit in excess of £250 without the court's permission.

BadCredit

This another term used to describe Credit Problems due to an adverse credit history. CCJ's, Mortgage Arrears and other credit debt repayment problems leads to a Bad Credit Rating. Bad Credit is more of an American term with the UK more commonly using Poor Credit. When used to describe: Bad Credit Homeowner Loans they mean Loans for people with Credit Problems or a Poor Credit History Secured Homeowner Loans.

C

CCJ

County Court Judgement (CCJ) judgements are given by the county court as a result of a non-payment of a debt. This can be for quite a small amount but can have serious implications for your credit record and your ability to obtain credit in the future.

In fact, once you have a CCJ it will appear on every credit search for the next seven years. However, if the debt is settled in full within 30 days of the date of the judgement it will not appear in the credit register. In the event of a payment after that date the judgement will appear in the register but will be shown as being satisfied.

If a judgement has not been settled and is outstanding this is likely to lead to a lender's refusing a mortgage or loan application.

Collateral

An asset that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.

Cooling Off Period

A period allowed in certain circumstances when a person who has entered into a contract (for example, an insurance policy or a personal loan) may cancel it without incurring any penalty.

Credit Limit

The maximum amount that you can borrow under a credit plan.

Credit History

A record of an individual's open and fully repaid debts. A credit history helps a lender to determine whether a potential borrower has a history of repaying debts in a timely manner.

Credit Report

These days having a less than perfect credit record or an irregular income should not stop you from taking out a mortgage or getting access to other borrowings. Recent research reveals that about a quarter of the population would be refused credit, showing that it is not a problem confined to the minority.

If you have had credit problems in the past don't immediately rule out the high street lenders. They say they take each case individually and would consider someone with a County Court Judgment (CCJ) for non-payment of debt, if it was for a small amount and had been cleared some time ago. But if you are refused credit, lenders don't have to tell you why.

Both a CCJ and a bankruptcy order are held on a person's credit record for six years. CCJ's can be withdrawn from your file if they are cleared within one month. It is worth knowing that you could unaware that you have a CCJ on your credit record, perhaps caused by a bill being unpaid if it was sent to an old address.

When you apply for credit, lenders check your credit record, called credit scoring, with specialist credit agencies that collect information from the courts, lenders and the electoral roll.

If you feel you there has been an error made in your credit scoring you can obtain your credit file from the main credit agencies Experian and Equifax for a cheque for £2. They will send you your details covering the past six years within seven days.

If you have a dispute about an item you can call or write to ask for an investigation and, if proved correct, to have your record altered. Beware of so-called credit repair companies, especially if they try to offer you loans at high rates of interest. If that happens steer well clear.

D

Debt

Amount owed to another.

Debt Consolidation

Replacing a number of existing loans with a single loan from a new lender. This can result in a reduction in your monthly payments by spreading the larger loan over a longer period and possibly, by reducing the overall interest rate.

Debt-to-Income Ratio

The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her gross monthly income.

Default

Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.

E

Early redemption charge

This is a charge made by your mortgage lender which is payable on certain types of loan - usually discounted or fixed interest rate loans. The charge is only applied if the loan is redeemed or part-redeemed within the specified early redemption charge period.

Effective Interest Rate

The cost of credit on a yearly basis expressed as a percentage. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Useful in comparing loan programs with different rates and points.

F

First Mortgage

A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).

Fixed Rate

An interest rate which is fixed for the term of the loan. Payments as well are fixed at one amount.

G

Gross Income

For qualifying purposes, the income of the borrower before taxes or expenses are deducted.

I

Interest Rate

The periodic charge, expressed as a percentage, for use of credit.

L

Lender

The bank, mortgage company, or mortgage broker offering the loan.

N

NegativeEquity

This means the value of your property is lower than the amount you owe on your mortgage or secured on it. This will be a problem if you want to move or maybe considering either a Remortgage or a Secured Loan.

Q

Quotation

A detailed document itemising costs, fees etc. which will be incurred in taking out the specified loan.

R

Rate

The annual rate of interest on a loan, expressed as a percentage of 100.

S

SecuredLoan

This is a Homeowner Loan that uses equity in your home for security to allow better interest rates than being an Unsecured Loan. You can use this loan for debt consolidation or home improvement. However, your home is at risk if you fail to keep up repayments secured on it.

SubPrime

This is a term used by lenders to describe the sector of Loan Problems. A sub prime loan is the same as a Non Status Secured Loan, a Non Standard Loan, an Adverse Secured Loan, a Poor Credit Homeowner Loan or a Bad Credit Secured Loan. Put simply, it is a Loan for People with Credit Problems.

Security

When a loan is taken out it is 'secured' on a property, the borrower agrees to the lender creating a charge over the property; the deed makes reference to the rights and obligations of both parties as detailed in the Legal Charge. Thus the property is known as the 'security'.

SelfEmployed

An individual who works for himself/herself. This will include partners in businesses and professional practices such as lawyers. You will be best to apply for a Self Employed Homeowner Loan.

t

Title Search

An investigation into the history of ownership of a property to check for liens, unpaid claims, restrictions or problems, to prove that the seller can transfer free and clear ownership.

U

Underwriting

The process of verifying data and approving a loan.

V

Valuation

A brief inspection of a property for mortgage purposes confirming the suitability of a property to secure money against and its value. inspection carried out for the benefit of the mortgage lender to ascertain if a property forms good security for a loan. Whilst the borrower may be given a copy of the valuation this is only a limited form of inspection and should not be relied upon on when deciding whether to purchase a property. Purchasers should be advised to obtain either a House or Flat Buyer's report or a full structural survey before proceeding with a purchase

Variable Rate

An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.