Loans Glossary Guide | will never contact you by phone to sell you any financial product. Any calls like this are not from Moneyfacts. Emails sent by will always be from Be Scamsmart.

nigel woollsey

Nigel Woollsey

Online Writer
Published: 15/03/2019


APR is a term you will see on several different lending products, including credit cards, overdrafts and loans. Short for annual percentage rate, it's a legal requirement for the APR to be shown for these products so that an easier and fairer comparison can be made. Read more about what an APR is here.


This is very similar to APR and stands for annual percentage rate of charge. It does the same job as an APR, but is used for mortgages, including second charge mortgages (secured loans).

Bridging loan

A bridging loan tends to be used as a last resort to tide you over in the short term to help secure a house purchase when you have not yet sold your own house. Beware: these loans are expensive. Commercial bridging loans are meant only to 'bridge' the gap before you sell a property, or secure longer-term finance once a project is completed.


A County Court Judgement (CCJ) is issued by a County Court for failing to repay a loan or outstanding debt. A CCJ will affect your credit rating and may affect your ability to get a loan or mortgage. CCJs can be enforced by bailiffs.

Consolidation loan

This is a loan taken out to consolidate debts (see debt consolidation below.) Find out how to deal with debt.

Consumer Credit Act

The Consumer Credit Act 1974 is the legislation that dictates aspects such as what information must be provided to borrowers before and during a loan, the terms of credit agreements, and calculations for APR. The Act requires that you are given full written details of the true interest rate (i.e. the APR) and in certain situations, you get a cooling-off period during which you can decide to change your mind and cancel the loan agreement. The Consumer Credit Act doesn't apply to mortgages or second charge mortgages (secured loans).

Credit rating

A credit rating is a points system used by banks and lenders offering loans and mortgages to estimate a person's creditworthiness and their risk potential. A record called a credit report or credit history is held on file by credit reference agencies documenting an individual's past borrowing and repayments. To compile this, they use public records, like whether you are on the electoral roll, have had a CCJ or have been made bankrupt. Read our guide on how to improve your credit rating for more information.

Credit reference agency

This is a company that compiles credit records of consumers and releases the information to companies offering credit terms (examples of such companies include Equifax and Experian). Most lenders will use such an agency during a loan or mortgage application. You have the legal right to request a copy of your credit report from one of these agencies, but there is usually a nominal charge for doing so.

Debt consolidation

Debt consolidation means to take out one loan to pay off several other loans or debts. A consolidation loan gives the security of more manageable monthly payments. However, this is dependant on your debt consolidation loan payments being lower than the total repayments of the debts being consolidated - through a lower interest rate, a longer repayment period or both. 

Debt management plan

A debt management plan (DMP) is a repayment scheme offered by a debt management company. They will negotiate your repayments over several years to enable you to make payments to your creditors more affordable. Find out how to deal with debt.

Early repayment charge

An early repayment charge may be payable to the lender if you decide to pay off your loan early, before the term set when applying for the loan.

Financial Conduct Authority

All credit lenders and brokers must be authorised by the Financial Conduct Authority (FCA) to continue to do credit business in the UK.

Interest rate

This is the percentage at which interest is charged on a loan or mortgage. Depending on the type of loan, this can be fixed or variable. The advertised interest rate for a loan is known as the APR (or APRC for mortgages). Find out more: What is an APR?


A loan is where a lender provides a temporary money advance to a borrower, usually over a set period. Once a loan is accepted it then becomes a debt for the borrower.

Loan payment deferment

A loan deferment allows you to start your repayments later than after the first month of the agreement and usually ranges from two to three months.

Payment holiday

Some loans let you take a break during the loan, for example, for one or two months each year. Some lenders will require the number or month of payment holidays to be decided at the application stage.

Payment protection insurance (PPI)

PPI is a type of insurance policy that is taken out to repay your agreed monthly loan amount if you are unable to make the payments, should you be taken ill, have an accident or are made redundant.

Personal loan

A personal loan – otherwise known as an unsecured loan – is taken out by an individual over a fixed term. This type of loan is available from a bank, building society or other financial institution without security. They are covered by the terms of the Consumer Credit Act. A lump sum will be loaned in return for you agreeing to make regular repayments, usually by direct debit. Personal loans are usually available from £1000 up to £25,000 (although some lenders will offer up to £50,000) and are repayable over a set period, usually between six months and five years. For more information, read the Moneyfacts Guide to personal loans, or to compare personal loans quickly, use our loan calculator.

Representative APR

The rate of interest you'll pay on borrowing is decided by your credit score and status. To allow you to compare products before applying (as you'll never know what rate you'll get until you're accepted), companies show a 'representative APR' in advertising. This is the advertised APR that providers expect a minimum of 51% of successful applications to be offered. So, if a loan is advertised as being 7.5% representative APR, this means that at least 51% of accepted applicants will get the rate of 7.5%, while others may get a different – probably higher – rate). Mortgage lenders will show a representative APRC, which will usually apply to all applicants who are accepted for a loan.

Second charge mortgage (secured loan)

This type of loan is one whereby some of your property (normally your home) is held by the lender as security for the amount you have borrowed, which protects the lender's investment and reduces their risk. They are also known as secured loans and are great for those wishing to borrow larger amounts or for those with a less-than-perfect credit history, such as arrears or County Court Judgements (CCJs). In terms of how they are treated from a regulation viewpoint, they are the same as mainstream mortgages. For example, the same rules around proving that you can afford the second charge mortgage will apply, and if you fail to meet repayments, the lender can file to repossess your house to settle the debt. For more information read the Moneyfacts guide to second charge mortgages


Use our loan calculator to help you search and compare the cheapest loans available.

Check your eligibility for a loan

Use our pre-approved loans service to see a selection of lenders that would accept for you a loan without affecting your credit score. This service is provided by our preferred broker, Loans Warehouse.


This information is intended solely to provide guidance and is not financial advice. 

Disclaimer: This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

close up of calculator

Cookies will, like most other websites, place cookies onto your device. This includes tracking cookies.

I accept. Read our Cookie Policy