A glossary of financial jargon

Do you feel intimated by the financial jargon thrown at you online or in branch? Scared to ask what these words that will affect your lending actually mean? Look no further than this financial glossary for all the terms you will need when considering different loans.

Personal or unsecured loan

This is a loan that is not secured against a property. It is usually up to £25,000 and offers a fixed repayment figure across a fixed term. An agreed amount is borrowed and then repaid across an agreed length of time at a specific interest rate. The payments will not change month to month which makes budgeting easier to manage.

Second charge mortgage

Formerly known as secured loans, this type of finance is typically for larger amounts that personal loans, so for security of repayment, lenders secure the loan against an asset, usually your house, meaning your home is at risk if you do not keep up repayments. Second charge mortgages are also usually available for longer repayment terms.

Car loan

This works in the same way as a personal loan but is agreed on specifically for the purchase of a car.

First charge mortgage

This is a large loan that is given to those who wish to purchase a house but cannot afford to make the payment up front. The loan is secured against the property so that it can be repossessed by the bank should the debtor default on repayments.

Consolidation loan

This is given to borrowers who have numerous existing loans. These loans are repaid with the larger ‘consolidation’ loan, which means that there is just one repayment to make each month. This enables borrowers to better manage their debt. If the interest rate is favourable, it could mean that less money is repaid each month than the sum of the separate loans. However if the loan is taken over a longer term the total amount repayable could be higher.

Hire purchase

This method of borrowing is used on big-ticket purchases such as a fridge freezer or sofa. It means that you can take the product at the start and repay the monies owed each month over a set period.

Payday loan

This is a short term borrowing of small amounts that must be repaid on the next payday. The interest rates are extremely high because of the short lending term.

Credit card

Your lender issues this card so that you can make purchases on credit. The credit must then be repaid at the rate the lender specifies on a monthly basis. A minimum payment must be made each month but ideally should be paid in full.

Store card

Similar to a credit card, this allows the borrower to make purchases on credit to pay for at a later date. This card determines that the goods can only be purchased from that particular store.

Credit rating

This is a score to measure your creditworthiness based on your previous credit history. If your credit report shows that you have always repaid borrowing on time then your rating will be good, if it shows missed or late repayments, or that you have received a CCJ, your rating will be poor.


This stands for Annual Percentage Rate and is used to show the total cost of borrowing over a yearly period. This total is inclusive of costs of borrowing such as upfront fees and interest rates. This figure facilitates comparisons across lenders.


This stands for County Court Judgement and is issued by a County Court in response to a failure to repay a debt. It adversely affects your credit rating as it shows you to be a less reliable borrower. As a result, future lending will be affected.

Early repayment penalty

This charge maybe incurred when a borrower chooses to pay off the loan or mortgage before the agreed term length has expired.

Eligibility criteria

This is the list of requirements and/or exclusions that will determine whether or not a potential borrower is suitable for a particular type of credit.

Repayment holiday

This allows borrowers to postpone repayments for an agreed time. The cost of the missed repayments will then be spread across the remaining payment term following the holiday.

Credit footprint

A credit footprint is the mark left on your credit report as a record of your application of credit. This ‘footprint’ shows the date of the credit check, the name of the lender to whom you applied, and the type of credit requested. It does not show whether or not the application was accepted.