Financial Terminology Jargon Buster A - E
Below is a MRR and PLR article in category Finance -> subcategory Other.
Financial Terminology: Jargon Buster A - E
Guide to Financial Terms
This guide helps demystify financial jargon from A to E, simplifying key terms to enhance your financial literacy.
A
1. Account Holder:
- The individual who owns a personal loan account.
2. Advance:
- Refers to the mortgage loan itself.
3. APR (Annual Percentage Rate):
- The total annual cost of borrowing, including interest and mandatory fees. If Payment Protection Insurance is required, it should be part of the APR. The usual APR applies to 66% of applicants for a credit card from the provider.
4. Applicant:
- A person who fills out and submits a loan application.
5. Applied or Nominal Interest Rate:
- The rate that calculates the interest on your mortgage.
6. Arrangement Fee:
- The charge paid to the lender to set up the loan.
7. Arrears:
- Overdue mortgage payments.
B
1. Bank of England Base Rate:
- Reviewed monthly, this rate significantly impacts interest rates for mortgages and loans.
2. Buildings Insurance:
- Protects the physical structure of your house, usually required upon contract exchange.
C
1. Capital:
- The amount you owe, excluding interest and fees.
2. Capital and Interest Mortgage:
- Payments cover both the loan and the interest, leaving you debt-free by the end. Also known as a repayment mortgage.
3. Capped Rate:
- A mortgage with a set maximum interest rate. If the variable rate falls, so does your payment within the capped period.
4. Cashback:
- A fixed amount or percentage of the mortgage given upon completion, usually offset by a higher interest rate.
5. Charge-off:
- Removal of an account from books as a loss, also known as Write-off.
6. Closing Administration Charge:
- A fee covering administration costs when a mortgage is fully repaid.
7. Completion:
- Finalization of the mortgage process. Contracts are signed, and funds are transferred?"time to move in!
8. Consumer Credit Act (CCA):
- Governs loan advertising and the presentation of loan terms like interest rates and APRs. Also requires consumer-accessible information on product terms.
9. Contents Insurance:
- Covers personal belongings.
10. Contract:
- A binding agreement. In house buying, both parties sign and exchange contracts, making the sale binding.
11. Conveyancing:
- The legal process involved in buying or selling property.
12. Credit Reference Agency (CRA):
- Gathers information on debts and repayment records. Used by lenders to assess credit history. Main UK agencies are Experian and Equifax.
13. Credit Scoring:
- Evaluates creditworthiness. Scores are based on factors like income and address history, predicting the likelihood of default.
D
1. Debt Consolidation:
- Combines all debts into one loan, potentially reducing monthly payments via lower interest or extended terms.
2. Default:
- Failure to comply with the loan terms, possibly leading to higher rates, charges, and credit report impact. Secured loans might put your home at risk.
3. Deferred Payment:
- Postponing the start of repayments, usually for 1-3 months.
4. Deposit:
- The initial payment towards a property's purchase price, due at contract exchange.
5. Direct Debit:
- Pre-authorized account debit for loan repayments.
6. Discounted Rate:
- A set reduction from the standard rate for a specific period, often used to attract new borrowers.
7. Drawdown Date:
- When the mortgage funds are released, and repayments begin.
E
1. Early Repayment Charge (ERC) / Early Settlement Penalty:
- A fee for paying off a loan before its full term ends. Often equates to two months of interest.
2. Early Redemption Charges:
- Fees for repaying a mortgage early. Important to inquire about these before signing a mortgage agreement.
3. Endowment:
- Life assurance policies with investment aspects to pay off mortgage capital. Promises from the 1980s often fell short, impacting policyholders.
4. Equity:
- The difference between property value and the remaining mortgage. Negative equity occurs when the property value is less than the loan.
5. Exchange of Contracts:
- For England and Wales, the legal step where buyer and seller are bound to the sale.
This guide offers a comprehensive understanding of essential financial terms, supporting informed decision-making in your financial journey.
You can find the original non-AI version of this article here: Financial Terminology Jargon Buster A - E.
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