Online banking

The A-Z of loans

If you decide to take out a loan, it's important to understand the small print and any terminology you might come across. Some of the wording can be a little confusing though, so we've created a glossary of the terms you might encounter.


  • Acceptance rate: the percentage of customers who are successful in their loan application.
  • Adverse credit: a bad credit record.
  • APR (Annual Percentage Rate): represents the actual yearly cost of funds over the term of the loan, including any fees or charges.


  • Bank of England: the central bank of the United Kingdom, the Bank of England is responsible for setting base interest rates for the economy, issuing bank notes and working towards maintaining a stable financial system.


  • Credit rating: a points rating used by financial providers to assess the credit worthiness of an individual.
  • Credit reference agency: an agency that compiles credit records of consumers and releases the information to companies offering credit terms.


  • Default: when a borrower fails to keep up with their loan repayments, affecting their credit rating and future loan applications.


  • Early settlement: if you want to pay off a loan early, under the Consumer Credit Act you are entitled to a settlement figure from your lender that could include a charge for repaying the loan early. To do this, you need to contact your lender and ask them to give you an early settlement amount for your loan. This is the total amount you must pay to clear the loan in full, including any charges.


  • Fixed rate: when an interest rate is fixed for a specific period.


  • Gross income: your income before any deductions have been made, such as tax.


  • Inflation: the general rise in prices across the economy over a year.
  • Interest rate: the percentage rate at which interest is charged on a loan. The rate will vary according to the type of loan and can be based on individual circumstances.


  • Payment holiday: a short period when you can temporarily stop making payments towards a loan. This varies from lender to lender and not all customers will be eligible for a payment holiday. You will need to check the terms of your loan.


  • Representative APR: is an advertised APR that a percentage of customers (who are accepted for a personal loan) will pay. Under current legislation the minimum percentage is 51%.
  • Risk-based pricing: occurs when a lender offers different customers different interest rates or other loan terms, based on the customer's individual circumstances. Each lender uses their own process to calculate the rate offered to an applicant, but most use a person's credit score, employment status, income, and other outstanding debts, among other factors.


  • Secured loan: a loan that uses an individual's asset (usually property) as equity. The amount offered will depend on a variety of factors, including the value of the asset.
  • SVR (standard variable rate): the interest rate the lender charges which fluctuates with changes in the base rate, affecting your interest payments accordingly.


  • Unsecured loan: loan that doesn't require the security of an individual's asset.