Personal Loans

Secured Loans

Other Loan Types

Residential Mortgages

Buy to Let Mortgages

Other Mortgage Types

Mortgage Payment Protection

Life Insurance

Other Finance

Mortgage Glossary

APR

APR or the Annual Percentage Rate, is a measure of the true cost of a loan or other finance. As well as measuring the amount of interest charged, the APR figure includes any other additional costs involved - e.g. arrangement fees etc.

APR is used to accurately compare loan products from different companies, where although the main interest rates may be the same, the real cost (and thus the APR) may vary.

Adverse Credit

Adverse Credit is simply an alternative term for Bad Credit and is mainly used in more formal financial documents.

Appraisal

A professional opinion of the market value of a property.

Appreciation

An increase in the value of a house due to changes in market conditions or other causes.

Arrangement Fee

An Arrangement Fee is a charge that some brokers make for arranging your loan. For example, if you took out a loan for £5000, the broker may add £200 to your loan amount and claim that for themselves - your loan would actually be for £5200.

Arrears

Arrears means that you have missed one or more repayments on a loan or mortgage, but have not yet defaulted on your loan.

Arrears are a factor in having a bad credit rating, but are not as serious as defaults or CCJs.

Bad Credit

Bad Credit is the term used to describe someone who is considered a high risk to lenders and other finance companies such as issuers of credit cards.

One of the most common reasons for having a bad credit rating is that, at some point in the past, you've got into financial difficulties and missed payments, defaulted on a loan or hire purchase agreement, or had debt recovery proceedings started against you.

You can also have a 'bad' credit rating if you have no financial history at all - this is called 'no credit' and is common with young people, divorcees and others who have not entered into credit agreements previously.

Bridging loan

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.

Building society

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

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

Buildings insurance

Buildings insurance is designed to give you financial protection for the basic structure of your home, such as the walls, roof and foundations. This usually includes any external parts of the property such as your garage, conservatory or greenhouse.

CCJ

If you default on a loan, the lender may apply to the County Court for a CCJ (or County Court Judgement). If you settle the debt within 30 days of the judgement, no further action will be taken, but if not, the CCJ will be added to your credit file and will worsen your credit rating.

Once the CCJ has been added to your file, if you repay the debt your file will show that the judgement has been 'satisfied', but it will remain on your file for up to 6 years.

Code of practice

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.

Collateral

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.

Consumer Credit Act

The Consumer Credit Act is the law that governs personal loans and other credit agreements such as hire purchase, credit cards etc.

Cooling Off Period

Under the terms of the Consumer Credit Act, there must be a cooling off period of 10 days after the loan agreement has been signed, where you can cancel the agreement for any reason without incurring a fee or penalty.

The cooling off period is mainly to protect consumers from salesmen selling loans using high pressure techniques, where a loan may be agreed and signed when it is not in the interests of the borrower to do so.

Credit Checks

These are checks made when you try to borrow money or purchase goods on hire purchase, and are used to determine the risk of lending you money. They will examine your credit history and check for payment defaults and what you owe to other financial organisation. A credit agency is often used.

Co-signer

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

Credit File

Your Credit File consists of details of your financial activity in the past, and is held by companies known as Credit Reference Agencies.

Your file will include records of applications for loans or credit cards, late payments, defaults, credit searches done by other companies, and other information which the lender can use as part of the Credit Scoring process.

Credit Reference Agency

A Credit Reference Agency is a company that collects and maintains details on the financial / credit activity of every person in the UK.

Details collected include loan and credit card applications, late payments, defaults, CCJs, good payment records etc. These details are provided to finance companies who use them as part of the Credit Scoring process.

Credit Scoring

Credit Scoring is the process used by most lenders to help them decide whether or not your loan application will be approved.

Each piece of information you supply on your application will be given a score that reflects the lender's profile of an ideal customer. For example, you may be given a high score for earning over £30,000 a year, but given a low or negative score for earning less than £5,000.

Debt Consolidation

A Debt Consolidation loan is a loan used to pay off all your existing debts, making your finances easier to manage and usually saving you quite a lot of money too, as the interest rates on a large loan are generally much lower than those on credit cards, overdrafts etc.

Defaults

Defaults are recorded on your credit file when you fail to make repayments on a loan over an extended period, and the lender considers it unlikely that you will make further payments.

Having defaults on your file will certainly make it harder to get credit in the future, but it is by no means impossible.

Deferment

Temporary postponement of loan repayment

Deposit (Mortgage)

Cash paid to the seller when a formal sales contract is signed.

Discount period

The time at the beginning of a mortgage life span when you are offered reduced repayments. Can be useful to help you overcome the often significant outlay involved with buying a property.

Equity

Equity is the term used to describe the difference between the value of your home and the amount of any loans or mortgage outstanding on it. If your home was worth £150,000 and you owed £75,000 on your mortgage, you would have £75,000 in equity.

Having equity in your home makes it much easier to obtain loans, as they can be secured against the equity.

Equity release

Equity release or home income schemes allow you to generate either a lump some or a regular income in return for allowing the lender to take ownership of a portion of your home. These are often used by people in later stages of life who have paid of all or most of their mortgage and who are looking to raise funds without borrowing money.

Fixed Rate Loans

Fixed Rate Loans are loans where the interest rate is fixed at a certain figure for the full term of the loan and does not change.

The advantage of this is that you know exactly what your repayments will be, and are protected against rises in the Bank of England base rate.

Fixed rate mortgage

A mortgage in which the interest rate does not change during the entire term of the loan.

High Risk

High Risk is another way of describing Bad Credit or Adverse Credit.

Having a bad credit rating can make getting loans more difficult, but ADM can arrange loans for people with bad credit, with CCJs, arrears, defaults and even discharged bankrupts.

Interest Rates

Interest Rates are how Lenders make money on your loan - they will charge a certain percentage of your outstanding loan, which will be added to theloan balance.

Interest rates are normally quoted in the APR format, and the lower the interest rate, the cheaper the loan.

The interest rate you pay will depend on several factors, but generally, the rate will be higher for unsecured loans and loans to those with bad credit

Joint income

The total gross income of the mortgage applicants.

LTV or Loan to Value

LTV or Loan to Value is the ratio of the size of a secured loan compared to the value of a borrower's home, expressed as a percentage.

If your home was worth £100,000 and you borrowed £80,000, the Loan to Value figure would be 80%.

Lender

A Lender is the company who actually provides the money for your loan. They are not usually involved in your loan application, this part of arranging your loan is handled by packagers or brokers such as loans.uk.com

Mortgagee

The lender in a mortgage agreement.

Mortgagor

The borrower in a mortgage agreement.

Payment Protection

Payment Protection is an option on all loans from ADM, and is a kind of insurance policy to cover your loan repayments should your financial circumstances take a turn for the worse - if you are ill, lose your job, or otherwise find yourself with drastically reduced income.

Personal Loans

Personal Loans are simply loans that are approved for an individual rather than a business, and can be used for any purpose (holiday, home improvement, debt consolidation etc.

Personal loans are available in various flavours, the most common being secured loans and unsecured loans.

Principal

The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.

Quotations

Borrowers are advised to shop around for quotations from different lenders before making a commitment. A quotation is also an illustration of the costs involved in the loan and repayments.

Refinancing

The process of paying off one loan with the proceeds from a new loan secured by the same property.

Repayment period

The period over which the borrower must repay the lender.

Second Charge

Second Charge is an alternative name for a secured loan, so called because the loan is guaranteed or 'charged' on your home, and is the second charge on your home - your mortgage being the first charge.

Secured Loans

Secured Loans are loans which are guaranteed by the equity in your home - if you default on repayments, the lender has the option of repossessing your home to repay the loan, although that step is very much a last resort.

Because of this security, secured loans are less of a risk to the lender than unsecured loans, and so the interest rate will usually be lower, and it is easier to get approved for those with bad credit ratings etc.

Term

The Term of a loan is simply the length of time the loan is repaid over. So, if your loan was taken out over five years, it would have a term of 60 months.

Title

A legal document establishing the right of ownership.

Title deeds

Documents stating who has title or right to the ownership of a property, which also show the boundary of the land.

Unsecured Loans

Unsecured Loans are loans which are not secured on your home. They are a good option for tenants or those with negative equity, but they are usually more expensive than secured loans, and can be more difficult to get.

Unsecured loans tend to have stricter credit scoring requirements than secured, as they represent a higher risk to the lenders.

Variable interest rate

A loan rate that moves up and down based on factors including changes in the rate paid on bank certificates of deposit or Treasury bills.