Glossary of terms for consumer credit

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Guide to many terms used in the consumer credit market.

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Acceptance rate – The percentage of customers who can apply for a loan or credit card. For 66% or more of the applicants, the quoted price should be offered as “typical annual interest” (see “Typical annual interest” below).

Annual Percentage (APR) – The interest rate payable annually for the loan or credit card balance. This allows potential customers to compare lenders. Under the Consumer Credit Act, the law obliges creditors to declare their annual percentage rate of charge.

Arrears – Unsuccessful payments for a loan, a credit card, a mortgage or most debts are called arrears. The borrower is legally obliged to pay the delay as soon as possible.

Organizational Expenses – Generally for the administrative costs of establishing a mortgage.

B

Base rate – The interest rate set by the Bank of England. This is the rate applied to banks for loans from the Bank of England. The base rate and its future evolution have a direct impact on the interest rate that a bank can charge the consumer on a loan or mortgage.

Commercial Loans: A loan that refers specifically to a business and is generally based on the past and probable evolution of the future business of the company.

C

Auto loan: a specific loan for the purchase of a car.

Consumer Credit Association (CCA) – Represents most of the consumer credit industry. Governments, municipalities, tax authorities, financial media and consumer groups are members. Members sign a constitution and must follow a code of conduct.

District Court Judgment (CCJ) – A CCJ may be issued by a district court to a natural person who has not paid the outstanding debt. A JCC negatively affects a person’s credit and may potentially result in a denial of credit. A CCJ will remain on credit for 6 years. You can avoid this significant negative point on the credit report by unpacking the CCJ in full within one month of receiving it. In this case, no details of the CGC will be stored in your credit report.

Credit tightening – A situation in which lenders reduce their loans at the same time, usually with the common fear that borrowers can not repay their debts.

Credit files – Information stored by credit reporting agencies, such as Experian, Equifax and CallCredit, on individual credit and loan agreements. The loan file is checked when the lenders examine a loan application.

Loan Agencies – Companies that keep records of individual credit and loan agreements, amounts owing, with whom and payments made, including defaults, CCJs, late payments, etc.

Loan Search – General search conducted by the lender from the credit reporting agencies.

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Debt Consolidation – Transfer of multiple debts into one debt through a credit or credit card.

Default: if you lose a regular repayment of the debt. A default value is recorded in a single credit and affects the chances of success of future loan applications.

Privacy Act – Parliament Act, 1998, and Key Acts Governing the Use of Personal Data in the United Kingdom. Lenders can not share personally identifiable information about individuals with other institutions or companies.

and

Prepayment Charge: A commission charged by lenders when a borrower repays debt before the end of the agreed term.

Fairness – The value of a property on a loan, mortgage or other debt. The amount of money a person receives when selling his property and paying off his debt in full.

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