Monthly Archives: December 2015

Glossary Of Consumer Finance Terms

wwA guide to many of the terms used in the consumer finance market.

A

Acceptance Rate – The percentage of customers that are successful when applying for a loan or credit card. 66% or more applicants must be offered the advertised rate know as the Typical APR (See ‘Typical APR’ below).

Annual Percentage Rate (APR) – The rate of interest payable annually on the loan or credit card balance. This allows potential customers to compare lenders. Under the Consumer Credit Act Lenders are legally required to disclose their APR.

Arrears – Missed payments on a loan, credit card, mortgage or most kinds of debt are termed Arrears. The borrower has a legally binding obligation to settle any arrears as soon as possible.

Arrangement Fee – Generally for the administration costs of setting up a mortgage.

B

Base Rate – The interest rate set by the Bank of England. This is the rate charged to banks for lending from the Bank of England. The base rate and how it may change in the future has a direct influence on the interest rate a bank may charge the consumer on a loan or mortgage.

Business Loans – A loan specifically for a business and generally based on the businesses past and likely future performance.

C

Car Loan – A loan specifically for the purchase of a car.

Consumer Credit Association (CCA) – Represents most businesses in the consumer credit industry. Government, local authorities, financial bodies, finance focused media and consumer groups are all members. Members sign a constitution and must follow a code of practice and business conduct.

County Court Judgement (CCJ) – A CCJ can be issued by a County Court to an individual that has failed to settle outstanding debts. A CCJ will adversely affect the credit record of an individual and can possibly result in them being refused credit. A CCJ will stay on a credit record for 6 years. It is possible to avoid this major negative stain on your credit record by settling the CCJ in full within one month of receiving it, in this case no details of the CCJ will be stored on your credit record.

Credit Crunch – A situation where Lenders cut back on their lending simultaneously usually down to a shared fear that borrowers will not be able to repay their debts.

Credit File – Information stored by credit reference agencies, such as Experian, Equifax and CallCredit, on an individuals credit and borrowing arrangements. The Credit File is checked when Lenders consider a credit application.

Credit Reference Agencies – Companies that keep records of individuals credit and borrowing arrangements, amounts owed, with who and payments made, including any defaults, CCJ’s, arrears etc.

Credit Search – The general search undertaken by the Lender with the credit reference agencies.

D

Debt C0nsolidation – The transfer of multiple debts to a single debt via a loan or credit card.

Default – When a regular debt repayment is missed. A default will be recorded on an individuals credit record and will adversely affect the chance of success of any future credit applications.

Data Protection Act – An act of Parliament in 1998 and the main legislation that governs the use of personal data in the UK. Lenders are not allowed to share an individuals personal data directly with other institutions or companies.

E

Early Redemption Charge – A fee charged by Lenders if a borrower pays back their debt before the debts agreed term is reached.

Equity – The value a property has beyond any loan, mortgage or other debt held upon it. The amount of money an individual will receive if they sold their property and repaid the debt on the property in full.

F

Financial Conduct Authority (FCA) – The government appointed institution responsible for regulating the finance market.

First Charge – The mortgage on a property. A Lender who has first charge on a property will take priority for repayment of their mortgage or loan from the funds available after the sale of a property.

Fixed Rate – An interest rate that will not change.

H

Homeowner Loan – Also commonly known as a secured loan. A Homeowner Loan is only available to individuals that own their own home. The loan will be secured against the value of the property usually on the form of a second charge on the property.

I

Instalment Loans – Multiple loan repayments spread over a period. Depending on the Lender their may be flexibility in the repayment amounts and schedule.

J

Joint Application – A loan or other credit application made by a couple rather than a single person e.g. husband and wife.

L

Lender – The company providing the loan or mortgage.

Loan Purpose – The purpose for which the loan was acquired.

Loan Term – The period of time over which the loan will be repaid.

Loan To Value (LTV) – Generally associated with a mortgage and taking the form of a percentage. This is the loan amount in relation to the full value of the property. e.g. an individual may be offered a mortgage of 90% LTV on a property worth £100,000. In this case the offer would be £90,000.

M

Monthly Repayments – The monthly payments made to settle a loan including any interest.

Mortgage – A loan taken specifically to finance the purchase of a property in most cases a home. The property is offered as security to the Lender.

O

Online Loans – Although most loans are available online. The Internet has allowed for the development of technology that allows for the faster processing of a loan application than traditional methods. In some cases a loan application, agreement and the funds appearing in your account can take as little as 15 minutes or less.

P

Payday Loan – A short term cash advance of up to 31 days which is repayable on your next payday. Payday loans come with a high APR because of the shorter term of the loan.

Payment Protection Insurance (PPI) – Insurance to cover debt repayments should the borrower be unable to maintain their repayments for any number of reasons including redundancy, illness or an accident.

Personal Loans – A general loan for any purpose and in varying amounts that can be provided to an individual based up on their credit history.

Price For Risk – Lenders now have a range of interest rates that are chosen based on an individuals credit score. An individual with a poor credit score is deemed High Risk and will likely be offered a higher interest rate as the Lender factors in the possibility of them defaulting on their repayments. Conversely an individual with a high credit score and a good credit history is considered Low Risk and will be offered a lower rate of interest.

Q

Qualifying Criteria – The eligibility requirements required by the Lender. The most basic criteria required to qualify for a loan in the UK are; permanent UK residency, age 18 or over and a regular income. Many Lenders may also include extra lending conditions.

R

Regulated – financial ‘products’ that are overseen by the Financial Conduct Authority (FCA). Lenders must follow a code of conduct and individuals are protected by the Financial Services Compensation Scheme (FSCS).

Repayment Schedule – The time period over which a loan will be repaid and the details of the loan repayment amounts.

S

Second Charge – A second loan, in addition to any other loan, that is secured against an individuals property.

Secured Loan – Also commonly known as a Homeownr Loan. A secured loan is only available to to homeowners. The loan amount is secured against the value of the property. The Lender has the right to repossess your property should you fail to maintain the loan repayments.

Shared Ownership – An agreement in which an individual owns only a percentage of the property. The remaining percentage is owned by a third party often a housing association. The individual may have a mortgage on the part of the property they own and pay rent on the part of the property they do not own.

T

Total Amount Repayable – The total amount of the loan plus the interest and any applicable fees.

Typical APR – The advertised interest rate that is offered to a minimum of 66% of successful loan applicants.

U

Underwriting – The process of verifying data and approving a loan.

Unregulated – Not covered and regulated by the Financial Conduct Authority (FCA).

Unsecured Loan – A loan that does not require collateral and is provided on ‘good faith’. Under the belief by the Lender that you can repay the loan based on your credit score, credit history and financial standing amongst other factors.

V

Variable Rate – An interest rate that will change during the loan repayment period.

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Convenient Repayment of Debts With Consolidation Companies

When you find yourself buried deep in debts, finding help at the earliest will save you from trouble. One of the main reasons why people suffer because of debts is the lack of proper planning and management. Some people do struggle because of reasons that are out of their control such as sudden loss of jobs or their inability to work due to a medical condition. Whatever the reason it may be, it is advisable to get expert help to help you deal with debts effectively.

Credit Cards

Credit cards are very easy to use. While some credit card holders keep a tab of where their money goes, some do not care about it. Banks these days offer a higher credit limit to attract more customers. The charges on annual fee may also be waivered by the bank if you spend a certain limit every year. This has encouraged people to spend more. While most people make sure that they repay their monthly credit card bills without fail, some do not. When you miss a payment it results in a penalty. Repeatedly missing your payments will result in the bank declining your credit card. You will end up owning the banks a lot of money which you will have to pay off at high interest rates. Getting debt help during this tough situation will help you manage your debts effectively.

How do Consolidation firms work?

If you are a local resident who is finding it difficult to tackle the numerous payments you are making towards your home, car and credit cards, getting debt help is a sensible thing to do. Making monthly payment towards multiple debts could be very stressful. Not all creditors are the same. Each one will have a different interest rate. In the long run, this debt repayment may become very complicated too. Firms offering consolidation loans can provide you with great solutions to get you out of debts faster.

Easy Repayment

When you contact a consolidation loan firm they will analyse your financial and debt situation. Based on your monthly income, they will consolidate all your loans into one single monthly payment. The best part of opting for consolidation loans is that you will be not be repaying your debt at a higher interest rate. The consolidation firm will work out a nominal interest rate for you based on how much you earn. Everyone wishes to lead a stress-free life. By consolidating all your debts you will be able to do exactly that. Since you do not have to keep track of multiple deadlines and payments each month, you can focus on paying off your debts faster. In addition, you will also have a longer time to pay off your loans.

Paying Off And Consolidating Credit Card Debt Your How To Guide

finCredit Cards have become a necessity of life these days, but one should use it carefully because spending much more than your capability of paying it off. More expenditure would increase the chances of having to take out a Consolidated Debt Loan or accruing bad debt in general. A Consolidated Debt loan on your Credit Card can be a headache. It stays as a burden over your head until you pay it off in full.

There are many ways of paying off your bad debts, including credit cards. Many of them are mentioned here, which will prove to be helpful to those with bad debt and even to those who are expecting to get a new credit card.

– Start by setting up financial goals, which could help you in paying off your bad debt. Accumulating debt is easy, but paying off those debts often takes a lot of time. All those who are under the burden of credit card debt should first of all prepare a list of the debts by gathering all of their card statements, and arrange it in the order of the priority i.e. the one which is very expensive and which has high interest rate should be kept on top, and other thereafter.

– Once you have prepared your list and set up the goals, you should keep on reviewing your progress, so that it keeps you motivated. It will help you in striving hard to pay off your debts in short period of time.

– Take your credit card out of your wallet and keep it in a place where you don’t confront it again and again. This will aid in your resistance from using the card and accumulating more debt.

– What you could also do in paying off credit cards, is to keep a tab over your expenses. Try to go for only those which are really necessary for you, and don’t indulge yourself in unnecessary expenditure.

– Another good way to clear off your bad debts easily is to use your savings, it could prove to be a boon in such circumstances. Whereas, it is not recommended if you do not have much savings or some strategy through which you can again gather much savings in shorter time span. Go for your savings in such case only when the condition have started getting worse, because spending your savings for paying your debts could lead to financial insecurity for you in the future as savings can be used as emergency funds for the future.

– One can go for Debt Re-financing, also known as Debt Consolidating Loans i.e. another loan which is specifically available for paying the consolidated debts. You can opt for a Debt Refinance, which is available at low rates of interest.

– Balance Transfer of your current Credit Card to a new credit card with low rates could help you in getting rid of your loans with ease; however it becomes necessary to get all the information related to your new credit card. Be careful of any kind of hidden fees, cause if there is any, it would simply be a waste of efforts and money. Even though, Balance Transfer is really helpful, but could impact your credit.

– Paying your credit card debt by choosing the lowest available EMI (Equated Monthly Installments) won’t prove to be fruitful. This is because it would lead you to pay high amount of interest over time.

– Another good option is taking out equity of your house or other property to pay off your debts. Although one should check for the value of his house or property before going for it because property prices may be rising up and going down. Sometimes choosing equity for property could lead one to increase his debts; probably because the property they have mortgaged may value lower than their debt. This option is used because mortgage rates are lower than credit card rates. Be careful doing this though, and to be sure that you don’t accrue any more debt with this sort of debt reduction strategy.

How to Improve Your Credit Scores Faster

3eWhen you apply for a home or personal loan, the first thing your bank will check is your credit score. A credit score or a credit history is basically a result derived from the analysis of a person’s credit files. In addition to banks, insurance companies, phone companies, and government institutions also use credit scoring to evaluate a person’s financial stand.

Why is Credit Rating Important?

When you fill in your application for a loan, the bank does not have any solid means to evaluate you in terms of your ability to repay the loan on time. So they use credit rating as a tool to determine how strong you are financially. For this, they do a complete analysis of your income, on-going mortgages, assets and take into account many other factors to assess you. This will provide the banks and other money lenders a clear picture of your monetary status. When you try to borrow money with bad credit, it is very likely that your application might be rejected.

Reasons for Bad Credit History

A person may end up with a bad credit score due to a number of reasons. When you miss your payments towards mortgages frequently, this can lead to bad rating. Laziness in paying the bills, poor financial situation and overspending are some of the major causes of bad credit. Different countries have distinct methods of assessing a person’s creditworthiness. A bank can deny the application of an individual requesting to borrow money with bad score. This is done as per bank’s policies in an attempt to protect themselves from people whose credit scores do not satisfy the set standards. To improve your credit score, you can talk to a consolidation firm for easy repayment options.

Home Loans with Bad Credit

Having a bad credit does not entirely disqualify you to obtain a home loan. You can still borrow money with bad score with the help of consolidation firms. If you wish to close a deal on a house you like, you do not have to worry if the bank rejects your application for loan. A consolidation firm will analyse your financial records and grant you loan on certain terms and conditions. Usually the person applying for the loan would have to pay a slightly higher interest rate than an individual who has a good credit rating. But as you make your payments regularly, there is a higher chance of your credit scores getting better. If you own an asset you can still borrow money with poor credit, since your asset will be used as collateral, not your credit score. This is called a secure loan. If you do not own an asset, then you still may qualify for an unsecured loan which is subjected to specific conditions.