Please note that these are a general explanation of the meaning of terms used in relation to personal loans.
Policy wording may use different terms and you should read the terms and conditions of the relevant policy to understand the inclusions and exclusions of that policy. You cannot rely on these terms to the part of any policy you may purchase. You should refer to the product disclosure statement.
Account-keeping fee / Ongoing fee: A monthly account-keeping fee that is charged by the lender to help cover the administration cost of maintaining the line of credit. Alternatively, you may be charged an annual fee rather than an ongoing account-keeping fee, especially for rewards credit cards.
Additional repayments: Extra payments that you choose to make to your loan on top of the minimum required repayments. See extra repayments (below).
Annual Percentage Rate: The total charge for the loan including fees and interest. This rate is expressed as a percentage so that you can compare rates across the market.
Application Fee: A fee charged by some lenders for the service of arranging and processing your loan application.
Asset: A resource that is controlled by a person because they own it or own an interest in it, and which will give them future economic benefits because of that ownership.
Automatic transfer: A system that is set up to automatically transfer money from a one bank account into another account at a certain point in time to coincide with bills or payments.
Balance: The amount remaining that has not yet been paid off on your loan. The opening balance is the balance of your loan at the start of a month or statement period. The closing balance is the balance of your loan at the end of a month or statement period, after all repayments have been taken into account.
Bankruptcy: This is when someone?s debt problems become so serious that they are unable to pay their existing debts and bills. When this happens, they can apply to a court to be declared ?bankrupt?, and any assets or savings they have can be used to pay off their debts. Normally after one year a person will be discharged from bankruptcy, but it will still have a negative impact on their credit rating and may stop them getting credit in the future.
Basis points: A basis point is equal to 0.01% interest. For example, 50 basis points is an interest rate of 0.50%.
Borrower: The person borrowing money in a personal loan from the financial institution. Also known as a debtor.
Car loan: A personal loan taken out to buy a car for private purposes. Also known as a vehicle loan.
Cash advance: Withdrawing cash from a line of credit such as a personal loan. Usually incurs additional fees or a higher rate of interest.
Caveat emptor: Latin for “let the buyer beware”.
Comparison rate: A rate that represents the total annual cost of the loan in a single figure, including the interest rate, payments, and most of the ongoing and upfront fees and charges. On the Canstar website, all comparison rates for personal loans are based on a $10, 000 loan over 3 years.
Consumption loan debt: Debt for personal loans for things that are either fully used immediately or depreciate in value from the time they are bought, including holidays, hire purchase, cosmetic surgery, furniture, furnishings, and other goods and services. Consumption debt does not include loan debt for property, business, investment, unpaid overdue bills and fines, and court-ordered damages payments.
Credit report or credit history: A report from a credit agency that contains a history of your previous loan and bill payments. Banks, lenders, creditors and financial institutions use this report to determine how likely you are to repay a future debt and whether or not they should lend money to you. Lenders can record a default on your file if you make loan repayments late. Every application for finance that you make is recorded on your file showing the lender you applied to, the type of finance, the amount and the date. Find out more about what is included in your credit report here.
Credit score or credit rating: A numerical score that represents the credit-worthiness of an individual or corporation, based on their positive and negative borrowing and repayment history. Your credit score is affected by whether you pay your bills on time, your current level of debt, the types of credit and loans you have, and the length of your credit history. Your credit score and credit report are used by lenders when deciding whether or not to lend to you, and are also used by lenders and insurers to set your loan and insurance rates. Find out how to check your credit score here.
Creditor: A lending agency to whom you owe money. Also known as a lender.
Current Rate: The rate advertised by institutions, not including fees, discounts and special offers.
Debt: Money owed by one person (the debtor) to another person or financial institution (the creditor). Requires a contract between them requiring the debtor to pay back the money. A debt is also known as a liability.
Debt consolidation (consolidation loan): When you take out one loan to pay off multiple other loans. This is often done to secure a lower interest rate, secure a fixed interest rate, or for the convenience of paying off only one loan instead of many loans.
Debtor: The person taking out the loan. See borrower (above).
Default: When a cardholder fails to fulfil their obligation to make the minimum required payments on their loan. Defaults are a serious black mark on your credit report and negatively affect your credit rating.
Drawdown: A drawdown is when a lender ?draws down? the loan from their funds into your bank account, and you use the money. Interest typically starts being charged from the date your loan funds are drawn down into your bank account.
Drawdown Date: The date on which you first use the money loaned to you.
Equity: Where you have borrowed money to buy an asset, equity means the difference between the value of the asset and how much you still owe on it. This is known as a ?residual claim to ownership?. For example, when an owner buys a car with a loan for $10, 000 and has repaid $6, 000 so far, the owner has equity of $4, 000 on the car.
Extra repayments: Some personal loans allow you to make extra payments earlier than the minimum required repayments, meaning you could pay off the loan sooner and lower the total you pay in interest. Usually only available with variable rate loans. Also known as additional repayments.
Fixed rate: A loan that lets a borrower “lock in” a particular interest rate for a period of time. During that time period, you pay the same interest rate every month in your repayments, regardless of whether the RBA official cash rate goes up or down. At the end of the fixed rate period, the loan will revert to a variable rate unless the lender and borrower agree to another fixed rate. Some loans have a fixed rate for their whole lifetime.
Guarantee: An undertaking or promise to pay an amount of funds if the borrower fails to meet their required repayments or breaks their loan contract in another way.
Interest in advance: When interest payments are charged at the beginning of a period. Usually only available with fixed interest loans.
Interest in arrears: When interest payments are charged at the end of a period.
Interest rate: The rate at which the outstanding balance of your loan increases per month if it is not paid or not paid in full.
Lender: The financial institution offering the loan. Also known as a creditor because they are offering an amount of credit.
Loan: An amount of money borrowed by one person from another person or financial institution. The amount must be repaid, and interest is charged on the amount until it is fully repaid.
Loan approval fee or approval fee: A fee charged when a loan is approved by a lender, to cover the lender?s costs from document searches, valuations, and loan processing.
I'm a full-time blogger and have blogged on over 10 blogs. Writing about personal finance, accounting and tax issues is my passion. Tips and advice to help you make the right decision about your cash flow problems. Compare payday lenders at getpaydayloan.us to get the right payday loan for you.
Moneysupermarket.com Group PLC (LSE: MONY) is a British price comparison website-based business specialising in financial services. The website enables consumers to compare prices on a range of products, including mortgages, credit cards and loans. It is listed on the London Stock Exchange and is a constituent of the FTSE 250 Index.
Georges Excel Loan Calculator v3.1 - Mortgage Home Loan Calculator with Amortization Schedule, Extra Principal Payments, and Scenario Comparison - Excel Spreadsheet Template - Requires Microsoft Excel 2007, Excel 2010, Excel 2013 or higher [Download]
Digital Software (George Alzamora-292329-292329)