Personal Loan Jargon Explained
With applications, credit criteria and contracts, there’s plenty of financial jargon to wade through when looking for a personal loan. Instead of nodding your head and simply hoping for the best, get clued up with our guide below.
The calculation of whether a borrower can afford the repayments of a loan, after income and expenses are taken into account.
An additional borrower whose income and credit history are used to approve the loan. All parties involved have an obligation to repay the loan.
The time period the loan is to be repaid in.
A loan which allows the lender to reclaim the loan value from one of your assets (eg. a car) when loan repayments aren’t made.
A loan which doesn’t allow the lender to reclaim any assets if loan repayments aren’t made.
In a loan, interest is the amount you pay for borrowing the money, usually calculated as a percentage of the amount borrowed, over a length of time.
An evaluation of the credit risk of a person. A credit rating allows lenders to estimate the ability of a person to pay back a loan, based on previous dealings. (We believe in second chances, so even if you have bad credit, we still might be able to help with a loan)
When permission is given to a bank to transfer a set amount of money on agreed dates, to a third party bank account. Direct debit is how our loan repayments are made.
Consolidating debt is when you take out a new personal loan to wrap all your existing debt into one loan. Check out our article: Should you Consolidate your debt?
Lump sum payments
Lump sum payments are voluntary additional payments, of any amount, put down on the personal loan during the loan term