Annual Equivalent Rate (AER)

Used to compare interest rates on savings accounts. 

Annual Percentage Rate (APR)

The yearly cost of a loan, including interest.

Arrears

Payments on an account which are overdue.

Assets

Any items owned which have a value such as cars, property, money, antiques etc.

BACS

Bankers Automated Clearing System. Electronic transfer of funds between bank accounts.

Bankruptcy

A process that legally declares a person cannot repay their debts, and provides protection for the debtor (the person who owes money).

Borrower

Someone who has received money or goods with the promise to pay it back.

Budget

A plan for balancing your outgoings against your income.

Capital

The total value of a person’s or businesses assets owned, minus whatever they owe.

Capital gain

Profit made on an owned item.  For example, if you sell an antique for more than you paid for it, the difference is a capital gain.

Cleared funds

When you pay money into your bank or building society it takes a few days to process the money through the system.  You cannot access the money until this has happened, once it has the money is know as cleared funds.

Committal Order

A court order for the arrest and imprisonment of a debtor usually following a breach of an instalment order.

Consumer

A person who uses goods or services.

Consumer Credit

Credit given by a retail store, bank, finance company, or other lender, mainly for the purchase of consumer goods.

Credit

Funds to buy goods or services that the borrower will pay back in the future.

Credit Card

A Plastic card that is used for purchasing goods and/or services against an pre approved credit limit.

Credit History

A record of every credit transaction you have, have had or applied for, this includes payment details.

Credit Limit

The maximum amount of credit that a lender will allow a consumer to borrow.

Credit reference agency

An organisation that collects information on people’s credit history, and reports to potential lenders. The 3 main credit reference agencies in the UK are Experian, Equifax and Callcredit.

Credit score

An assessment of someone’s ability to pay debts based on their credit history and circumstances. A high rating indicates that the individual is considered less of a financial risk and lenders are more likely to lend to them.

Creditor

Someone who has lent money or goods to someone.

Debit

Any transaction that reduces the balance on an account.

Decree

A court document which agrees that a debt is owed to a creditor and must be repaid.

Debit Card

A bank card used to make electronic withdrawals from funds that you have available in a bank account.

Debtor

Someone who has borrowed money or goods from someone.

Debt Collection Agency

An Organisation which acts on behalf of a Creditor to collect the debts they are owed. They will usually contact the debtor by phone or letter to chase payments owed, They may also visit the debtor in their home but they have no legal rights of access.

Demand for Payment

This will be issued by or on behalf of a creditor who is owed money by an individual and contractual payments are not being made. It is a letter which will threaten legal proceedings unless payment is received-usually within 10 days.

Dependant

Someone who is relying on you for support i.e.. Children under 18 years of age or that are in full time education.

Direct debit

A form of payment agreed by a bank account holder, which authorises a creditor to withdraw varying sums from their bank account.  Often used to pay bills. Creditor controls the amount collected.

Disposable Income

The income that is left over when your outgoings are subtracted from your income.

Early Redemption Penalty (ERP) or Early Redemption Charge (ERC) or

The penalty you have to pay if you want to repay a debt before you are due to.

Endowment

An insurance policy that pays out a lump sum at the end of a set period or on death.

Equity

The difference between the market value of an asset and the amount of loan or mortgage outstanding on it.  Usually applied to home ownership

Eviction

The removal of a tenant from rented premises by the landlord.

Execution Order

A Court Order which gives the Sheriff the right to seize any moveable goods which are on the premises and owned by the debtor.

Financial Regulator

The main regulator of the Financial Services industry in Ireland.

Financial Statement

A summary of your income and outgoings showing how much money, if any, is left over to pay off your debts.  The Financial Statement is central to any negotiation with creditors or courts.

Garnishee Order
Or “Attachment of debts”

This is a court order against a 3rd party who holds money owed to or belonging to a debtor. It means the creditor can have those debts paid to them instead. Usually applied to a debtor’s wages due or bank or building society accounts.

Gross income

The total amount of money earned (before any deductions such as tax and national insurance).

Hire Purchase (HP)

A method of purchase often used to buy cars and household items, where the item is legally owned by the creditor until the end of the agreement.  NB. This means even if the item is returned to the creditor the debt can still remain.

Inflation

A rise in general level of prices of goods and services over a period of time.

Insolvent

Unable to pay ones debts.

Interest Only Mortgage

A Mortgage where you pay only interest each month, the original loan amount would still be outstanding at the end of the term.

Interest Rate

A percentage rate, paid on borrowings as a fee.

Judgement

A decision which is made by a Court stating that you are legally required to pay the amount stated in the Decree. This will be registered in the High Court.

Judgement Mortgage

A Court Order which gives the creditor a charge over the debtor’s land or property which is registered with the land Registry. It means the land or property cannot be sold without the creditors debt first being repaid.

Lenders

Companies which lend money or goods to consumers or companies.

Lending Criteria

Standards set by the companies, which need to be met before credit is offered.

Loan

A sum of money lent at an interest rate, with a contract for it to be repaid over a set period of time.

Loan to Value

The amount a Mortgage Lender will lend, shown as a percentage of the value of the property you are buying.

Mortgage

A loan to finance buying a house or land, with that house or land  given as security for the loan

Mortgage payment protection Insurance (MPPI)

(See PPI below) This is similar to PPI but will cover your mortgage payments usually for up to 2 years if you are made redundant or are unable to work due to illness or injury

Negative Equity

Having secured borrowing on your house that is greater than the value of your home.

Net income

The amount of income after all deductions (for example, tax and national insurance).  Can also be called ‘take-home pay’.

Non-Dependants Contribution

The amount of money paid to you by someone living with you that you are not financially responsibly for. E.g. board/keep

Overdraft

An arrangement with a bank which allows customers to withdraw more funds from a current account than they actually have – a form of lending.

Payment Protection Insurance (PPI)

These are usually linked to loans, credit cards or other credit agreements. You pay a premium to an Insurance company and your payments will be covered if you are made redundant or are too ill or injured to work

Priority Debts

Debts which have serious consequences if not paid, such as losing a home, essential services being disconnected or imprisonment.

Pro rata payment

A method of paying your creditors where the amount you have available to pay is allocated by dividing the total amount owed to each creditor by the total amount they are owed.

Remortgage

Changing your mortgage to a different lender.

Repayment Mortgage

A mortgage where you pay off a mixture of the original amount borrowed and interest each month
(also known as capital and interest mortgage)

Repayment Vehicle

Investment that will be used to repay the original loan amount on a mortgage, such as an ISA or Personal Equity Plan (PEP)

Repossession

A legal process which involves a lender taking possession of a borrowers property when repayments haven’t been met.

Second Charge

If more than one loan is secured on a property, the lender with the first charge on the property has the first rights to the property value in the event of the loan not being repaid. Any additional loans have a second, third or fourth charge which will be repaid after the first charge in the order they were made.

Secondary Debts

Debts which put the borrower at a less serious risk than Priority Debts if not paid.  Such debts can lead to court action, Charging Orders or Attachment of Earnings.

Secured Lending

Lending which is guaranteed on either property or land. If the borrower does not pay, the lender can take the property and sell it to pay off the debt. Mortgages are a form of Secured Lending

Security/Collateral

Something owned by a borrower that a lender has the right to take possession of if the borrower stops (defaults) making repayments.

Standard Variable Rate (SVR)

The normal lending interest rate charged by a bank or building society.

Standing order

A regular (usually monthly) payment made by the bank on your behalf.  Unlike direct debits, details, such as payment amount, cannot be changed unless you inform the bank. (i.e. you are in control)

Summons

A document which is issued by a Court which states officially that a debt is owed and to whom. It will require you to either repay your debt or demand your appearance in court on a specified date and time.

Tax Code

Letters and numbers used by employers to deduct tax from earnings of people paid under the Pay as you Earn system. The first three figures of the code followed by a zero is what you can earn each year before paying tax. This information is available on your pay slip.

Term

Length of a loan

Unauthorised Overdraft

An arrangement with a bank which allows customers to withdraw more funds from a current account than they actually have – a form of lending. This will not have been formally agreed.

Unsecured Loans

A loan which is not guaranteed on property or land e.g. personal loan

Utilities

Services such as gas, water, electricity or phone