Cosmetic surgery loans

Personal loans glossary

• APR. The Annual Percentage Rate (APR) is designed to be a benchmark for consumers, providing an annual summary of the cost of a loan. As well as the interest, the APR also takes into account any compulsory charges – like an “admin” or “set-up” fee (if there is one). However, crucially, lenders only have to award the advertised APR to 51% of those who take out the loan – the other 49% could be offered a different (higher) rate, at the lender’s discretion. That’s why it’s often referred to as the representative APR.
• Capital. Also referred to as the “principal” or “loan amount”, this is the original amount borrowed.
• Default. Defaulting on a loan means failing to make a pre-agreed repayment at the specified time. This will typically result in the borrower being charged a penalty plus damage to the borrower’s credit record.
• Draw down. Drawing down simply refers to the transfer of funds to the borrower at the start of a loan.
• Eligibility criteria. A list of conditions that a borrower must meet in order to be considered for a loan. These vary from lender to lender.
• Fixed rate. A fixed rate will not change for an agreed amount of time, even if market conditions mean that bank interest rates generally are increasing or decreasing. A fixed rate can be a popular option for some borrowers, and it allows them to budget with more certainty – knowing in advance the exact cost of a loan and the exact figure for each instalment.
• Guarantor. An individual who promises to repay a loan in the event that the borrower does not. Typically a friend or relative of the borrower.
• Instalment. A repayment towards an outstanding loan. This will normally consist partly of interest accrued so far, and partly of a proportion of the original sum borrowed.
• Interest rate. The interest rate is a charge for borrowing, and is a percentage of the amount of credit.
• Loan term. The amount of time over which a loan is to be repaid.
• Principal. Also referred to as the “capital” or “loan amount”, this is the original amount borrowed.
• Repayment holiday. An agreed period (normally either one or two months) where the borrower will not make repayments. The debt continues to accrue interest during this period, so taking a repayment holiday will generally increase the total cost of borrowing (and the loan term). Repayment holidays are typically offered to borrowers at the start of a loan, or at a specified frequency – for example one per year.
• Soft search. Before offering you a loan, a lender will run a “hard” search of your credit file, to see if you have a good track record with debt. This will be recorded on your credit file, and has a slight (but usually temporary) adverse effect on your credit score. That’s why it’s not a smart idea to apply for lots of loans in a short space of time. The good news is that most lenders can now run a quick “soft” search before you apply – giving you a strong indication of your chances of getting approved, without affecting your credit score.
• Unsecured. An unsecured loan does not use an asset, such as a property or vehicle, as collateral for the loan.
• Variable rate. A variable rate is the opposite of a fixed rate, and can increase or decrease over time at the lender’s discretion. Typically, variations occur as market conditions generally shift – for example in increase or decrease in the Bank of England base rate.