Personal Loan Jargon Buster

We know financial phrases and acronyms can be super confusing, so to help you understand what exactly you’re getting when you consider a personal loan, we’ve put together a glossary of the terms you may come across.

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APR stands for Annual Percentage Rate and it represents the rate of interest and any additional charges on top of the agreed loan amount.


Base rate

In the UK, the base rate is the rate of interest that The Bank of England charges other banks and lenders when they borrow money. This rate influences what interest lenders will charge.


Car loan

A car loan is a personal loan that is used specifically for the purchase of a car.



A CCJ stands for County Court Judgement, which is filed against you when you fail to repay money you owe and is a fine you owe the court. If you receive a CCJ, it will affect your credit rating, and future lending can be affected.


Credit footprint

A credit footprint is the mark left on your credit report every time it is searched for, either by yourself or by others. The footprint will show the date of the credit check, the name of the lender that you applied to and the type of credit that you requested.


Credit rating

A credit rating, also known as a credit score, measures your creditworthiness based on your history. Your credit rating will inform lenders if you’ve repaid loans on time, and if you have missed repayments, which will help them to decide whether you’re eligible for a loan or any other credit. The higher the score, the more chance you have of being accepted for a loan.


Credit reference agency

A credit reference agency collects information about a person’s financial history and creates a credit report based on these details. These reports are made available to banks and lenders.


Debt consolidation loan

A debt consolidation loan combines multiple debts into one manageable loan. This means that borrowers will have just one repayment each month, instead of multiple ones.


Early repayment penalty

You might think you’re being helpful if you decide to pay off your loan early, however, you may be charged an early repayment penalty if you do. This is generally a one-off payment that you’ll be asked to make if you pay off a loan or mortgage before the agreed term length has expired.


Eligibility criteria

This is the list of things that will determine whether a potential borrower is suitable for a particular type of credit, such as age or income.


First charge mortgage

A first charge mortgage is a large loan that is given to people who wish to purchase a house. The loan is secured against the property, so that it can be repossessed by the bank if the borrower fails to make their agreed repayments.


Fixed interest rate

If you have a fixed interest rate, this means that you have a set rate of interest that cannot change during the loan period, regardless of whether the base rate goes up or down.


Interest rate

This is the amount you pay back on top of the amount you borrow. The interest rate you’re offered depends on many things, such as your credit rating, the loan provider, and the term of the loan.



An overpayment is anything extra that you decide to pay back that’s not currently agreed with the lender. For example, you could decide that you want to make a large lump-sum payment, or you could simply choose to pay back a higher amount each month than was originally agreed.


Payday loan

A payday loan is when a small amount is borrowed over a short term and the amount must be repaid on the borrower’s next payday. Interest rates are generally high on payday loans because it’s over such a short term.


Repayment holiday

Just like its title, a repayment holiday allows borrowers to postpone repayments for an agreed time. If you take a break from making monthly repayments, the cost of the missed payments will then be spread across the remaining term.


Secured loan

A secured loan is typically for larger amounts so, for the safety of repayment, lenders secure the loan against an asset, which is usually a house. This means that your home is at risk if you don’t keep up with repayments.


Unsecured loan

An unsecured or personal loan is not secured against a property. It’s usually up to £25,000 and offers a fixed repayment figure across a fixed term.

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