Glossary of loan terms
The following is a glossary of the terms used by loan and mortgage brokers such as SecuredLoansPark which you may find helpful if you are considering either a secured loan or mortgage and are unsure of the terminology used:
Annual Percentage Rate (APR): A definition intended to identify the true cost of borrowing on a loan or mortgage and to provide the customer with a method for comparing loan or mortgage costs.
Arrears: Mortgage payments that have not been made by the due date in accordance with a lenders mortgage deed.
Bad Credit: This is credit which has fallen into arrears or not been paid on time. Sometimes referred to as adverse credit.
Base Rate: The interest rate set by the Bank of England which is reviewed on a monthly basis. This is the rate at which some banks and lending institutions borrow money from the Bank of England and is not to be confused with their own lending rates.
Bridging Loan: A short term loan to "bridge" the period between buying a property and selling a previous one.
Broker Fee: A fee paid to an intermediary or introducer for arranging/finding the loan or mortgage.
Consideration Period: This is "cooling off" period that every loan customer is legally obliged to receive under CCA regulations. An "advance copy" of a proposed loan agreement is issued and the same agreement for signing is issued 8 days later. The period in between is the consideration period.
Consumer Credit Act (CCA). This is the principal legislation covering all loan amounts including secured loans. First charge mortgages are regulated by the Financial Services Act and do not fall within the CCA.
Debt Consolidation Loan: Replacing a number of existing loans and/or credit cards with 1 single loan from a new lender.
Early Repayment Charge (ERC): This is a fee charged by a lender if a borrower pays off a loan or mortgage earlier than an agreed date.
Equity: This is the difference between the value of a property and the amount of mortgage owed on it, including any secured loans.
Financial Services Authority (FSA): This is an independent organisation set up to regulate the financial services industry.
First Charge: This is the 1st mortgage charged to a property.
Home Loan: A loan charged to a property, also called a secured loan or second charge loan using the equity in a borrowers property.
Home Equity Loan: A loan charged to a property, also called a secured loan or home loan, using the equity in a borrowers property.
Individual Voluntary Arrangement (IVA): An arrangement to repay debtors through an Insolvency Practitioner which is petitioned through the High Court and often seen as a preferred alternative to bankruptcy.
Introducer: A person who introduces a loan to a lender or introduces a borrower to a broker.
Land Registry: This is where property ownership and mortgage details are registered.
LIBOR: Abbreviated from London Interbank Offer Rate it is the rate at which banks lend to each other.
Loan Amount: The amount to be borrowed.
Loan to Value (LTV): This is the ratio of the total amounts owed on a property as a percentage of the property value i.e. if a borrower owes £50,000 on a mortgage and has a property value of £100,000, his LTV is currently at 50%.
Master Broker: A broker such as SecuredLoansPark who arranges a secured loan on behalf of a client. They issue all documents to clients, arrange valuations and request all references. They then "package" the loan for a lender to complete the loan.
Mortgage: This is a loan to buy a property. The property is security for the loan and can be repossessed by the lender if the borrower fails to maintain agreed repayments. If the property is sold the mortgage is repaid.
Pre-emption: This is the discount granted by the council when a borrower buys their council property under a right to buy scheme.
Remortgage: This is mortgaging a property that you already own usually replacing an existing lender with a new lender or a new mortgage product.
Right to Buy (RTB): This is an option to buy a council property in which someone lives, often at a discounted price depending on how long you have lived in the property.
Secured Loan: This is a second charge loan on a property also known as a home loan, second charge loan or home equity loan.
Self certification: Where a client is unable to provide proof of income in the normal way and therefore certifies that they earn a given amount each month. Some lenders accept a self certification of income but usually at higher rates of interest.
Term: This is the amount of time that you would like to take a mortgage or loan over, usually expressed in months or years.
Whole of Market: Some brokers are not tied to selected products and have access to "whole of market". This means they can check every loan or mortgage on the market. SecuredLoansPark is a whole of market broker.