Glossary of Terms

Here is a list of terms you may come across when you are looking for a loan

Annual Percentage Rate – APR

The APR is the total rate of interest payable over the course of a year, including fees, administration costs, and charges. By looking at the APR, you can compare deals offered by different lenders clearly and easily. Lenders are normally legally required to display the APR when advertising credit items.


The person applying for a loan.


If you have missed repayments and fallen behind on your financial commitments, your account will be in arrears.


A third-party that helps customers find a lender.

Collections team

The department in a lending company that is responsible for collecting the repayments when due, and for helping customers who have fallen into arrears or who may be struggling with their repayments. The Collections Team can assist with repayment plans and referring customers to independent debt advice organisations.

County Court Judgement – CCJ

A CCJ is issued by a court to a person who has has failed to repay a debt.

A CCJ can harm a person's credit rating and make obtaining credit more difficult and / or increase the rate at which lenders will offer credit in the future.

A CCJ will normally remain on a person's credit record for six years.

Credit history

A record of an individual's financial history. It shows all loans, credit cards, overdrafts, and bank accounts that are linked to that person.

It shows all balances on all accounts, and whether that person has been punctual and consistent on meeting repayments. Potential lenders carry out a credit search to identify the credit profile of the applicant.

Credit rating, Credit score

A score which is issued to a customer's credit file so that potential lenders can judge their credit worthiness.

Credit search

A search and background check of an applicant's credit file, conducted by a lender to determine eligibility for a loan.


This is the lending company that provided credit to a customer.

Debt consolidation

This is where someone takes out a loan or uses a credit card to clear a number of smaller, often higher-interest debts. Although debt consolidation will not always make repaying debts cheaper, it can certainly make repaying debt more manageable.

If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.


A default notice is issued to someone who consistently fails to keep up with their loan repayments. It could be considered the first stage, prior to further debt recovery action being taken, that could include terminating the loan contract, making the total loan balance due immediately.

Further action could then progress into legal action being taken to recover the debt - for example a CCJ being issued.

A default can harm a person's credit rating, making it more difficult to obtain credit and/or increase the rate at which lenders will offer credit in the future.

Fixed rate

A rate of interest on a loan or credit item that remains the same and doesn't go up or down.

Further advance

Additional borrowing offered to existing guarantor loan customers. Customers can top-up their loan via a further advance (new loan) up to the value of £12,500. The new loan is used to pay off the existing loan and the additional money is released as cash.


A guarantor is the person who chooses to act as security against a loan, in a manner of speaking. They co-sign the loan, along with the applicant, and agree to take responsibility for monthly loan repayments if the borrower is unable to do so.

Guarantor loan

A loan which that allows a consumer to borrow, on the condition that they provide a guarantor to co-sign their loan and take joint accountability. In return for providing a guarantor, the borrower will be eligible for lower interest loans and higher borrowing amounts than their credit rating would ordinarily allow.

High-street lender

These are mainstream lenders, such as high-street banks and building societies, who offer lower-interest credit items. These can be inaccessible to people with less-than-perfect-credit.

Homeowner guarantor loan

A type of guarantor loan that is available to borrowers who can find a guarantor who owns their own home. Homeowner guarantor loans offer more favourable rates of interest and higher borrowing limits of up to £12,500.


The lender is the company that issues the loan and who you borrow money from.

Loan term

The period of time over which a borrower must repay their loan, usually over a period of scheduled monthly repayments.

Monthly repayments

A loan amount to be repaid each month, as part of an ongoing series of repayments over a period of time.

Payday loan

A short-term loan, usually of up to 31 days, which is used to tide customers over until their next payday. Borrowing limits tend to be for smaller sums of money. Payday loans normally have high APRs.

Qualifying criteria

To be eligible for a loan, an applicant must meet certain criteria. For example, an applicant will need to reside in the UK, have a working income, and be over the age of 18.

However additional qualifying criteria will need to be met in some instances, usually in relation to an applicant's credit score.

Repayment schedule

Refers to the scheduled loan repayment agreement between the borrower and lender. This will state the amount to be repaid on an agreed date, and the time period over which repayments are to take place.

Secured loan

A loan that is secured against collateral – typically a home. If the borrower becomes unable to meet repayments, the lender will have the legal right to seize the collateral in order to get their money back.

Tenant guarantor loan

A type of guarantor loan that is available to borrowers whose guarantor isn't a homeowner. It may be easier for an applicant to find a guarantor who doesn't have a mortgage, but the maximum available loan amount is lower than for somebody who has a homeowner guarantor. Also, interest rates are normally higher.

Total amount repayable

The total sum of money which must be repaid by the borrower over the term of the loan – includes the original sum of money, interest and any fees.


The procedure through which a lender will process a loan application, verify data and documents, and either approve or decline the application.

Unsecured loan

A form of borrowing which isn't secured against any collateral, such as a house or car. Lending takes place on a credit risk basis with final approval being the subject to a credit check against the applicant.

Variable rate

An interest rate which can change and fluctuate.