Loan Jargon - a comprehensive reference of loan terminology from i Secured Loans

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Call Option

A clause which allows a lender to ask for the balance at any time.

Cancellation Clause

A clause which outlines how either party can terminate an agreement.

Capital Repayment Mortgage

Payments contribute to both the interest on the mortgage and the capital borrowed. At first payments contribute mainly to the interest, then in the later stages a higher percentage will repay the capital.

Cap

A limit on the amount the interest rate can increase for a variable rate loan.

Capped Rate

An interest rate on a loan that can change, but can't be greater than a set rate fixed at the time the loan was taken out.

Capital

The original amount of money borrowed, not inclusive of any interest charged.

Cashback

A seller offers customers a cash refund after they purchase a product

Caveat Emptor

A legal principle that the buyer alone is responsible if dissatisfied. Derived from the Latin "let the buyer beware."

Central Bank

The bank of a country that controls its credit system and money supply

Certificate of deposit

A negotiable instrument which provides evidence of a fixed-term deposit with a bank

Certificate of Satisfaction

This is issued by the County Court after a CCJ has been settled.

County Court Judgement or CCJ

A County Court Judgement is a judgement in the County Court for the repayment of an outstanding debt. This debt will not appear in the credit records if this debt is settled within 30 days of the date of the judgement. Many lenders are not willing to offer loans to anyone with an unsettled judgement, there are however, a number of lenders that specialise in arranging credit for people with an adverse credit rating such as CCJ's.

CHAPS

Clearing House Automated Payment System. A method for rapid electronic transfer of funds between banks.

Charge

The security the lender relies on when issuing a mortgage.

Charge card

A credit card for which a fee is payable but which does not allow the user to take out a loan. The customer must pay off the total sum or a proportion of the total sum at the end of each month.

Chargee

A person who holds a charge over a property and who has the right to force a debtor to pay

Chattel Mortgage

Money lent against the security of an item purchased, but not against a property.

Cheap Money

Low interest rates, use as a government strategy to stimulate an economy.

Cheque

A bill of exchange drawn on a bank, payable on demand

A certificate issued from the Land Registry that shows details such as the boundaries of a property.

Chose in action

A personal right which can be enforced or claimed as if it were property e.g. a patient, copyright or debt.

Circularisation of debtors

The sending of letters by a company's auditors to debtors in order to verify the extent of the company's assets.

Closed-end credit

A loan, plus interest and charges, that is to be repaid in full by a specified future date. Loans with property or cars as collateral are usually closed-end.

Closed-end mortgage

A mortgage in which no prepayment is allowed

Collateral

A security pledged as a guarantee for repayment of a loan. Should the borrower fail to repay the loan then the property, or other asset, can be repossessed.

Collateralise

To secure a loan by pledging assets. If the borrow defaults on loan repayments, the pledged assets can be taken by the lender

Collection

The steps a lender takes to bring a delinquent loan/mortgage up to date.

Comparative credit analysis

An analysis of risk associated with lending to different companies

Compound interest

Interest calculated on the sum of the original borrowing amount and accrued interest.

Compound rate

An interest rate of a loan based on its principal, the amount remaining to be paid, or any interest payments already received.

Consolidated debt

The use of a large loan to eliminate smaller ones

Consolidated loan

A large loan, the proceeds of which are use to eliminate smaller ones

Consumer Credit Act

Gained Royal Assent in 1974. It is designed to protect consumers when borrowing money.

Contractual Lien

A voluntary obligation such as a mortgage or trust deed.

Contribution

An amount of money paid into an account. This can be on a regular basis or a 'one off' payment.

Consolidation

Putting all your debts into one place, can be referred to as debt consolidation. This can help reduce monthly payments. Consolidation is good if you have multiple personal loans and credit cards which you'd like to pay off. Instead of multiple repayments, these are brought into one affordable monthly payment.

Co-signer

A person who assumes joint liability for a loan. But not necessarily a co-owner of the asset.

County Court Fee

This is charged when a lender starts county court proceedings when the borrower is in arrears.

Cover

The taking out of insurance by an individual in order to protect against loss, damage, risk or liability. For example, Life insurance pays your family if you die.

Cover note

A document that an insurance company issues to a customer to serve as a temporary insurance certificate until the issue of the policy itself.

Credit

The amount of money left over when an individual has more assets than liabilities.

The trust that a lender has in a borrower's ability to repay a loan

Credit Agencies

Companies who issue credit reports to loan providers. The reports give individual assessments of loan applicant's creditworthiness.

Credit Agreement

An agreement between the lender and borrower detailing the various terms and conditions. This must be signed before the borrower receives their loan.

Credit Balance

The amount of money a person owes on a credit account

Credit Capacity

The amount of money a person can borrow and be expected to pay back.

Credit Card

A card issued by a financial institution and accepted by merchants as payment for a transaction. The card holder must subsequently reimburse the card issuer.

Credit Checks

These are checks made when a borrower applies for credit or to purchase goods on hire purchase, and are used to determine the risk of lending money. The borrower's credit history is examined and checked for payment defaults.

Credit Co-operative

An organisation of people who have formed a group to gain advantages in borrowing

Credit Crunch

This is a situation where money for borrowing becomes unavailable

Credit History

A potential borrower's record of repaying debts.

Creditor

A business or organization to whom money is owed, in other words a lender.

Credit Limit

This is the highest amount a lender will allow a person to borrow.

Credit Note

A document which state the amount of money owned and entitles the holder to goods to the specified value.

Creditors' meeting

A meeting of those whom a bankrupt person owes money

Credit Period

The time frame for which the lender agrees to provide supply credit.

Credit Rating or Credit ranking

The degree of credit worthiness assigned to an individual based on their credit history and financial status. An assessment of a person's creditworthiness or process of obtain it.

Credit Reference Agency

A business that assesses people's creditworthiness on behalf of banks and businesses. These companies are used by loan providers to make individual assessments. They keep credit records of all individuals and businesses. Examples of credit reference agencies are Experian and Equifax.

Credit References

These are details the credit that a borrower has been given in the past, supplied as references when opening a credit account with a new supplier.

Credit Report

Information about a person that's relevant to deciding to grant them credit.

Credit Risk

The possibility that loss may happen from the failure of someone to perform according to the credit contract

Creditors' settlement

An agreement for part repayment to those whom a bankrupt person owes money.

Credit Score

A calculation that each lender makes in the process of credit rating

Credit Standing

The reputation a person has for fulfilling their financial obligations

Credit Union

This is a savings co-operative association who lend money to members a low interest rates

Creditworthy

To be considered suitable to receive commercial credit.

Critical Illness Insurance

This is insurance cover for an individual for life or for a set period against serious illnesses and medical conditions. It pays out a single tax-free lump sum when the diagnosis of one of the illnesses specified in the policy.

Current Account Mortgage

A long term long, usually for buying property, where the borrower pay interest on the sum loaned in monthly instalments and repays the principal as a lum sum at the end of the loan term. The lender takes into account the balance on the borrower's current or savings account when calculating the interest payments. It's the borrower's responsibility to make the necessary provision for the principal during the period of mortgage; this could be by contributing to tax efficient investment plans such as Individual Savings Accounts, or by relying on inheritance.

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