Reference

Loan and finance glossary

38 borrowing terms explained in plain English, from APR to voluntary termination.

APR: Annual Percentage Rate. The yearly cost of borrowing including interest and compulsory fees, used to compare loans.
Arrangement fee: A charge for setting up a loan, either paid upfront or added to the loan balance.
Balloon payment: A larger final payment at the end of an agreement, common with PCP car finance.
Bridging loan: Short-term finance secured on property, used to bridge a gap until a sale or refinance.
CCJ: County Court Judgment. A court order to repay a debt, recorded on your credit file for six years.
Closed bridge: A bridging loan with a fixed repayment date, usually because a sale has exchanged.
Consumer Credit Act: The UK law giving borrowers rights including withdrawal, early settlement and clear information.
Credit reference agency: A company that holds credit records, such as Experian, Equifax and TransUnion.
Debt consolidation: Combining several debts into one loan with a single monthly payment.
Default: A record that an account has been closed by a lender because payments were not made as agreed.
Early repayment charge: A fee for repaying a loan early. On regulated loans it is capped by law.
Equity: The value of an asset minus any debt secured on it.
Exit strategy: How a short-term loan will be repaid, usually by sale or refinance.
FCA: Financial Conduct Authority. The UK regulator of consumer credit and mortgage firms.
Factoring: Invoice finance where the funder manages your sales ledger and collects payments.
Financial Ombudsman Service: A free service that settles complaints between consumers and financial businesses.
First charge: The primary legal claim over a property, usually held by the main mortgage lender.
Fixed rate: An interest rate that stays the same for the agreed term.
GDV: Gross Development Value. The expected value of a property development once complete.
Guarantor: A person who agrees to repay a loan if the borrower cannot.
Hard search: A credit check made when you apply, visible to other lenders.
Hire purchase: Finance where you pay for an asset in instalments and own it after the final payment.
Invoice discounting: Confidential invoice finance where you keep control of collections.
LTV: Loan to Value. The loan amount as a percentage of the asset's value.
Monitoring surveyor: An independent surveyor who checks development progress before funds are released.
Open bridge: A bridging loan without a fixed repayment date, repaid within a maximum term.
PCP: Personal Contract Purchase. Car finance with lower monthly payments and an optional final balloon payment.
Personal guarantee: A promise by a director or owner to repay a business debt personally if the business cannot.
Representative APR: The APR that at least 51% of successful applicants for an advertised product are expected to receive.
Retained interest: Interest for the full loan term deducted from the advance at the start.
Rolled-up interest: Interest added to the loan balance and repaid at the end of the term.
Second charge: A secured loan ranking behind an existing mortgage on the same property.
Secured loan: A loan backed by an asset the lender can take if repayments are not made.
Soft search: A credit check visible only to you that does not affect your ability to borrow.
Total amount repayable: Everything you will pay over the life of a loan, including interest and fees.
Unsecured loan: A loan with no asset pledged as security.
Variable rate: An interest rate that can move up or down during the term.
Voluntary termination: Your right to end HP or PCP once half the total amount payable has been paid.