A Glossary of cash till payday loan terms

ACH: – an automated clearing house (ACH) is a service which enables the management and settlement of electronic transactions within a given country and specified clearing cycle period, operating typically on working days only. In the UK, this function is performed by BACS Ltd, which is owned by a number of banks and financial institutions on behalf of the payments industry.
AER: – Annual Equivalent Rate. This shows what the interest rate would be if interest were paid and added to your account each year.
APR: – Annual Percentage Rate. The interest payable on what you've borrowed is added up along with other charges (e.g. arrangement fees) and then expressed as an annual rate of charge. The APR helps you compare the true cost of borrowing, for example for a mortgage. The APR takes into account all fees and charges applied to the mortgage as well as the monthly payments over the life of the loan.
Arrangement fee: – a fee to cover administration.
Arrears: – money that was due to be paid but has not been paid. When you are behind in payments, you are in arrears. Sometimes this term is used to define a contracted mortgage payment not made by the due date. Applicants who have arrears on a current mortgage may experience problems if attempting to arrange a new mortgage through the mainstream lenders. A number of lenders do, however, specialise in this area of the market.
Assets: – your money, property, goods and so on that have a financial value.
Assurance: – a policy that you pay for, and that pays money to your next of kin when you die.
BACS Ltd: – formerly known as the Bankers Automated Clearing Service, BACS Ltd is an organisation owned by a group of banks and building societies. It provides a clearing service for electronic transactions and the management and provision of related payment services and networks to the UK banking industry.
BACS Payment: – a BACS payment is an electronic instruction to credit a payee's bank or building society account in the UK with a specified amount in a sterling or euro denomination. The service is facilitated by BACS ltd and works on a three day clearing cycle.
Banker's draft: – a cheque drawn on the bank (or building society) itself against either a cash deposit or money taken directly from your own bank account. A banker's draft is a secure way of receiving money from someone you don't know and where a cash is inconvenient. Banker's drafts are commonly used for large purchases such as homes and cars.
Base rate: – the interest rate from which lenders set their rates for lending and savings products. It's usually based on the base rate set by the Bank of England.
Capital: – money that you've invested or borrowed (e.g. to buy a home). It doesn't include the income or profit you get from an investment, or the interest you have to pay on a loan or mortgage.
CHAPS: – Clearing House Automated Payment System. This is a system that enables money to be transferred from one bank account to another on the same day.
Chip and PIN: – a system to reduce card fraud. A chip and PIN card has a 'smart' chip that holds your four-digit Personal Identification Number (PIN). When you pay in a shop with a chip and PIN card, you'll be asked to enter your PIN into a keypad instead of signing a receipt. This PIN is the same number that you use to withdraw money at a cash machine.
Cleared balance/cleared funds: – includes credits (cheques and cash) that have completed the clearing cycle. You can only withdraw or transfer money to another account with money from your cleared balance. The cleared balance is updated during the day as you make payments into and out of your account.
Clearing cycle: – the process that your cheque goes through when you pay it into your account. A cheque won't be cleared if, for example, the person who gave it to you doesn't have enough money in their account.
Credit card: – allows you to borrow money to pay for goods and services without using cash or cheques.
Credit balance: – the amount of money in your account.
Credit limit: – the maximum amount of money that you may borrow.
Credit report: – a document that list your credit history created and updated using information from Banks, Retailers and other sources, i.e. Courts.
Debit card: – debit cards are basically plastic cheques. When you pay by debit card the money is taken directly from your bank account within a day or two of the transaction. There is no credit involved since your account is debited the same day you make a purchase. Details of purchases are shown on normal bank statements.
Debt: – an amount of money that you owe to a person or company.
Direct Debit: – an instruction from you to your bank or building society allowing someone to take money from your account. The amount of money taken can vary, but you must be told the amounts and dates beforehand. Direct Debits allow you to pay bills automatically from your account on a regular basis.
Debt Consolidation: – sometimes referred to as loan consolidation, this simply represents the policy of borrowing on mortgage in order to repay other loans or debts. This can be achieved as part of a re-mortgage or by arranging a further advance from the existing lender.
Discounted rate: – a variable rate that is set at a fixed percentage amount below the lender's standard variable rate for a period of time. At the end of the period, the mortgage goes back to the lender's variable rate.
EAR: – Effective Annual Rate. This is the amount of interest charged on an overdraft and is stated as an annual rate. Unlike the APR, the figure does not include any fees or charges.
Equity: (in property) – the difference between how much your property is worth the balance of your outstanding mortgage and any other debts secured on the property.
Equity release: – a way of releasing extra money by borrowing against the equity in your home.
ERTF: – Exchange Rate Transaction Fee. This is a fee that you pay when withdrawing foreign currency from a cash machine or when paying for something in another currency (e.g. when you're on holiday abroad). The foreign currency is converted into pounds sterling (using the bank's exchange rate) and a fee for doing this is added.
Fixed-rate interest: – an interest rate that stays the same throughout an agreed period.
Flexible mortgage: – a mortgage that allows you to make overpayments and underpayments on the mortgage without penalty, and, in some cases, to take payment holidays.
Further advance: – an additional loan made by the existing mortgage lender and secured by the first charge on the property. The Further Advance can be used for a variety of purposes (subject to the lender's approval) such as home improvement, purchase of freehold or personal purposes, such as debt consolidation.
Gross: – the whole amount before any deductions (such as tax or fees) are made.
Gross interest rate: – interest before income tax is deducted.
Guarantor: – a person other than the borrower who guarantees the mortgage repayments. A Guarantor can sometimes be used to support a borrower who has insufficient income to qualify for a mortgage in their own right.
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 amount that you pay when you borrow money. It's expressed as a percentage rate over a period of time.
Interest-free: – no interest is charged on money that you borrow.
Interest-only mortgages: – a loan on which you only pay the interest element. The amount of capital you owe remains the same throughout the term of the mortgage and is due to be repaid at the end of the term.
Interest rate: – the rate at which you pay back interest, expressed as a percentage of the amount you borrow.
Investment: – something you put money into that will provide income in the future (such as savings) or gain in value so that you can sell it at a higher price later (such as a house).
Loan: – money that you borrow (e.g. to buy a new car) on condition that you pay it back.
Loan period: – also called repayment period, this is the time it takes to pay back the loan. A shorter period means higher monthly payments (there are fewer months over which to spread them), but less interest paid in total on the loan.
Lifetime mortgage: – a type of equity release product for the over 60s, which allows you to release money by borrowing against the value of your home. There are no monthly repayments, instead the interest is added to the loan and the whole amount is repaid when you die or move into long-term care, usually from the sale of the house. This means more interest will build up than with a conventional mortgage.
Mortgage: – a loan to help you buy property on condition that the company giving you the loan has certain rights, including the right to sell the property if you don't pay back the loan.
Net: – the amount after deductions (such as tax or fees) are made.
Net interest rate: – the rate payable after the lower rate of income tax is deducted (NB the rate of tax may vary, so a net rate is usually only given as an example).
Nominal annual rate: – the rate of interest that would apply if the interest were not added each year and if there were no inflation.
Online Banking: – also known as e-banking, online banking or Internet banking. Major high street banks and previously unknown operators have moved in, in the last year or so, to establish fully fledged Internet banking operations.
Outstanding: – when you borrow money with a credit card the amount you have yet to pay back is called the amount outstanding.
Overdraft: – a facility (usually at a bank or other financial institution) enabling an account holder to borrow up to an agreed amount and often for an agreed time.
Overpayment: – higher or extra mortgage payments that you make (usually to pay off your loan or mortgage early).
p.a.: – 'per annum', which means 'each year'.
Personal Loan: – loans available from banks and other financial institutions to private individuals for personal use such as the purchase of a motor vehicle, holiday or similar item. Repayment periods vary from one year to five years. No collateral is asked for or given for the loan.
PIN: – Personal Identification Number. This is the four-digit number that you enter into a cash machine when you want to take out cash, and that you use when you pay with your chip and PIN card. Never give this number to anyone, or write it down.
Rate: – the percentage interest rate charged by a lender.
Remortgage: – replacing a mortgage with a new one (from your existing or a different lender), without moving home. You use the money you borrow for the new mortgage to repay the old one. Usually done to switch to a mortgage deal with better terms.
Repayment method: – the means by which a mortgage is repaid. The two main repayment methods are 'interest only' and 'repayment'.
Repayment mortgage: – a loan where you pay back some of the capital as well as interest each month. The amount you owe is gradually reduced.
Return: – the profit you get, for example, when you invest money.
Share: – a unit of ownership in a company.
Share certificate: – shows the amount of ownership.
Share dealing: – the process of buying and selling shares.
Standing order: – a method of making regular payments directly from your bank account. It's a fixed sum and you tell your bank when to start and stop paying it.
Stock: – another term for share.
Transaction: – each time you pay money into or take money out of your account, it's called a transaction.
Unarranged borrowing: – an overdraft that is higher than your bank or building society has agreed to.
Uncleared balance: – the amount of money in your account including all the uncleared items in your account and any items paid in during the day.
Underpayment: – a loan or mortgage payment that is less than the amount that you should normally pay for that month.
Unsecured loan: – payday loans and most personal loans are so-called unsecured loans. This means that the lender does not have a particular asset, such as your home, to reclaim if you should stop payments on the loan before it was paid back.
Variable-rate interest: – the interest rate that you pay on your loan or mortgage and that rises and falls roughly in line with a stated index, such as the base rate set by the Bank of England.