Personal Loan Terminology
Personal loans are an incredibly useful way to access some cash when you need it, whether it be for a holiday, car, or even to pay off some debt. However there are lots of products on the market, and it is worth educating yourself about some of the terminology you will encounter. In this article, we will take a look at some of the common terms that you might hear while shopping around.
Adjustable Rate Loan: A loan is an adjustable rate loan if the re-payments vary over time.
Adverse Credit: This is another term for “bad credit”. It refers to a situation in which payments for loans have not been repaid in full or in a timely manner.
Arrears: This refers to the situation in which fall behind in your payments.
Bankruptcy: This term refers to the situation in which a court decides you cannot repay what you owe to your lenders.
Base rate: The base rate is the minimum possible interest rate that you can get for a loan.
Consolidation Loan: A consolidation loan is a loan that is used to pay off your existing debts. It can be used to minimise late payment fees. It also simplifies your repayments, as you only have only the consolidation loan to pay off, rather than many different loans.
Credit rating: This is the score that lenders give you to decide whether or not you are a suitable candidate for a particular loan.
Debt Management: Sometimes you may find that you are unable to pay off your loans in time. A debt management plan allows you to extend the duration of your loan so you can pay it off over a longer period of time.
Fixed Rate Loan: A loan has a fixed rate if the interest rate does not change at all, so you never have to worry about your payments increasing. On the other hand, your payments will never decrease on a fixed rate loan, so it is worth getting some financial advice before deciding between a fixed rate loan and an adjustable rate loan.
Flexible Loan: This is a type of loan that gives you some freedom to choose how much to borrow and how quickly to pay it off.
High Risk Personal Loan: Usually a high risk loan is one that is offered to someone with bad credit. This is often at the cost of higher interest rates.
Interest Rate: This is used to calculate how much your repayments are and how long you will need to repay for. A higher interest rate means the repayments will be higher or the duration of the loan will be longer.
Secured Personal Loan: A loan that is given against some form of security in case of default.
