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A Glossary of cash till payday loan terms

ACH - Automated Clearing House; manages electronic cash transactions, which in the UK are processed by BACS Ltd.

AER - Annual Equivalent Rate.

APR - Annual Percentage Rate; can include arrangement fees and any other charges as well as the monthly interest over the life of a loan.

Arrangement fee - a charge to cover administration costs and setup of a loan

Arrears - overdue payments.

Assets - anything of value that you own.

BACS Ltd - Bankers Automated Clearing Service, owned by a group of financial institutions, it manages electronic cash transactions.

BACS Payment - an instruction to electronically credit a payee's account with a specified amount.

Banker's draft - a secure way of transferring large amounts of money similar to a cheque.

Base rate - the interest rate set by the Bank of England. Lenders use it as the basis to set their own interest rates.

Capital - the amount of money invested or borrowed, not including income or interest.

CHAPS - Clearing House Automated Payment System; enables same-day transfer of funds from one account to another.

Chip and PIN - introduced to reduce credit and debit card fraud. A "smart" chip on the card records your PIN (Personal Identification Number) which must be entered on a keypad when the card is used to withdraw cash from an ATM or used to pay for goods.

Cleared balance/cleared funds - cash or cheques that have been processed through the clearing cycle to arrive in your account.

Clearing cycle - the process of verifying funds have reached your account.

Credit card - used to pay for goods and services up to an agreed credit limit.

Credit balance - the amount of money in your account.

Credit limit - the maximum amount you may owe to your credit card company.

Credit report - a record of your credit history based on information from credit card companies, banks and the Courts.

Debit card - used to pay for goods and services by debiting your bank account.

Debt - any amount of money owed to an individual or company.

Debt Consolidation - taking a new loan in order to repay other debts or loans.

Discounted rate - a reduced loan (often mortgage) rate set at a certain percentage below the standard variable rate for a fixed length of time after which it reverts to the lender's standard rate.

EAR - Effective Annual Rate; the interest charged on a bank overdraft not including any fees.

Equity (in property) - the difference between the value of your property and what you owe in the form of an outstanding mortgage or other debts secured on the property.

Equity release - a way to raise money by borrowing against the equity in your property.

ERTF - Exchange Rate Transaction Fee; charged for withdrawing foreign currency from an ATM or paying in a foreign currency whilst abroad.

Fixed-rate interest - loan or savings interest rate that remains the same over an agreed length of time.

Flexible mortgage - a mortgage with allowances to underpay or overpay without being penalised.

Further advance - an agreed extension to an existing mortgage.

Gross - the entire amount before deductions.

Gross interest rate - the rate before tax deductions

Guarantor - a person who has agreed to guarantee mortgage repayments for someone who does not have enough income to obtain a mortgage themselves.

Insurance policy - a policy that you pay for, and that pays money to you to cover possibilities such as theft, damage to property, loss and so on.

Interest - the extra paid back when you borrow money, usually expressed as an annual percentage.

Interest-only mortgages - loans for which the capital owed remains the same throughout the loan period and only the interest is paid. This means that the capital must be repaid at the end of the loan period.

Interest rate - the rate, expressed as an annual percentage, at which interest is paid on a loan.

Investment - something you buy to provide a return in the future.

Loan - money given to you which you agree to pay back sometime in the future, often with interest on top.

Loan period - the time allowed to pay back the loan. Typically a payday loans period is one month, although the loan can be rolled over twice.

Lifetime mortgage - a method of equity release for over 60s. You borrow money against the equity in your home, you pay no monthly payments but the interest is added to the loan amount. This is repaid by the sale of the house when you die or move into care.

Mortgage - a loan to buy property with certain conditions attached. If you do not keep up your payments the lender has the right to sell the property to recoup the loan.

Net - the amount after tax and other deductions.

Net interest rate - the interest rate payable after the lower rate of income tax is deducted.

Online Banking - banking operations performed on the internet.

Outstanding - the amount outstanding is the amount of a loan you still have left to pay.

Overdraft - an amount borrowed on a current account by agreement with your a bank or building society

Overpayment - a payment to your mortgage lender greater than the agreed amount in order to pay off the loan earlier.

p.a. - "per annum" which is Latin for "each year".

Personal Loan - a loan to a private individual from a bank or other financial institution.

PIN - Personal Identification Number; the number you use when you pay for goods and services with a "chip and pin" card.

Rate - the annual percentage charged on a loan.

Remortgage - to negotiate a new mortgage on your existing home.

Repayment method - how you repay your mortgage, either "repayment" or "interest only".

Repayment mortgage - an arrangement to repay some of the capital of the loan each month as well as the monthly interest payment.

Return - the profit from an investment.

Share - a unit of company ownership.

Share certificate - proof of ownership of a company's shares.

Share dealing - the buying and selling of shares.

Standing order - instruction to your bank or building society to pay regular fixed amounts.

Stock - a unit of company ownership.

Transaction - paying money into or taking money out of an account.

Unarranged borrowing - allowing your overdraft to exceed the agreed amount.

Uncleared balance - the balance of your account including any uncleared funds.

Unsecured loan - most personal loans are "unsecured", meaning they do not require collateral.

Variable-rate interest - an interest rate that rises and falls to follow the "base rate" set by the Bank of England.



Implications of Non-Payment

We always recommend repaying on time, and our representative examples assume that you will. If you are unable to pay on time, each lender has their own policies with regards to fees and interest, and how they collect outstanding debts. Most will contact you by phone or letter in order to rearrange payment. Non-payment may result in charges and/or raised interest. We suggest contacting your lender as soon as you are aware there is a problem, as otherwise, it may be noted on your credit record.

Renewal Policy

If you wish to renew your loan, you should contact your lender in advance. Most lenders will charge the same rate of interest and fees for another month on the entire amount owed. In the event of non-payment, a loan renewal/extension could be automatic and further interest and/or charges may be added to your account.

Rollovers

You may have the opportunity to roll over your loan, which means paying off the interest earned to date and continuing to gain interest on the original loan amount over an extended term. This interest will most likely be at the same rate that the original loan was charged at. Some lenders may insist on a rollover as opposed to a renewal.

All of the above varies between lenders. More responsible lending information.