Jargon Buster

APR stands for Annual Percentage Rate. 

It represents the total cost of borrowing money over a year, including interest and any other fees associated with the loan. 

Essentially, it's a way for lenders to show the true cost of borrowing, allowing consumers to compare different offers.

Arrears occur when missed, late or partial payments cause a loan balance to be higher than it should be at that time in the repayment schedule.

Arrears are not a extra charge on your loan but are the amount that needs to be paid to bring your loan back on track.

A balloon payment is a large, one-time payment due at the end of a loan or finance agreement, typically in place of higher monthly payments. 

It's common in car finance, particularly Personal Contract Purchase (PCP) agreements, where it's often called the Optional Final Payment

A Credit Union loan will never have a balloon payment

Bankruptcy is a legal process where individuals or businesses facing debts they cannot repay can seek relief through a court-administered process. 

It allows for the distribution of the debtor's assets to creditors and provides a path towards financial fresh start after a period of time. 

In the UK, bankruptcy typically involves a 12-month period where assets may be used to pay off debts.

A budget is a plan for your income and expenses. It breaks down where you’re spending your money, giving you an idea of where you might be able to make savings and cut costs.

A budget planner from Money Helper is available here.

A Credit Union is a not for profit  financial cooperative owned by its members. Providing financial services for its local area.

A credit agreement is a legally binding contract made between a borrower and a lender. It outlines the rules of the lending, which include repayment terms, fees and interest rates.

Credit reference agencies are independent organisations which securely hold financial data about individuals. They collect information about credit history and make it available to banks, building societies, credit unions and other financial organisations. Organisations will access a persons credit file through a credit reference agency when they apply for credit, which helps them to make a decision.

Lenders can check your credit file when they are assessing an application for credit, or sometimes they can check your file before making you an offer to entice you to apply for credit. The results show current and historic debts, credit and highlight if payments have been made late or not at all.

Credit Reference Agencies gather information about your credit history and put this information into a credit report. Its then calculated to create a credit score for you based on the information within your credit report. Lenders will ask credit reference agencies for information about you before making a decision on your loan application.

A credit score helps lenders to decide whether a person is likely to meet the financial commitment to them.  It’s important to understand that your score is not just focussed on repayments, it also includes factors such as whether you are using credit responsibly.

A CCJ is a court order and is registered against a person to instruct them to repay a debt. CCJ’s can negatively affect your credit score and ability to obtain credit for up to 6 years.

The Data Protection Act controls how personal/customer information is used by organisations or by government bodies.

Direct Debit is an instruction from you to your bank or building society that authorises the organisation you want to pay to collect the sum amounts from your account, this is arranged by giving notice of the amounts and dates of collection.

When money is deposited with a credit union, you become a member. The credit union may pay dividends back to you on the amount you have saved, which is produced from the surplus made by the credit union.

To find our more about dividends visit our how to guide here

The Financial Conduct Authority is a financial regulatory body in the United Kingdom, but operates independently of the UK Government, and is financed by charging fees to members of the financial services industry.

The FOS is an regulator in the United Kingdom. It was established in 2000, and given statutory powers in 2001 by the Financial Services and Markets Act 2000, to help settle disputes between consumers and UK-based businesses providing financial services, such as banks, building societies, insurance companies, investment firms, financial advisers and finance companies.

The FSCS is the UK’s statutory Deposit insurance and investors compensation scheme for customers of authorised financial services firms. This means that FSCS can pay compensation if a firm is unable, or likely to be unable, to pay claims against it. Protection is covered up to £85,000.

Increasing to £125,000 from 1st December 2025

A guarantor loan is a type of unsecured loan that needs the borrower to have a second person to act as a guarantor for the loan. A guarantor loan can be a suitable option if you’re struggling to get approved for a personal loan because you’re suffering from ‘bad credit’. The guarantor needs to agree to repay the loan if the borrower becomes unable to do so.

Like a dividend a credit union may pay a rebate to its borrowing members biased on available surplus.

To find out more visit our how to guide here

The interest rate is the amount charged (expressed as a percentage) by a lender to a borrower for the use of a loan. Interest rates are typically worked out for a loan on an annual basis, known as the annual percentage rate (APR).

Open Banking allows you to share certain financial information that only you and your bank can see, such as your balance and transaction history, with other financial providers or services of your choosing. The idea is to make it easier for other organisations to use your data to personalise products or make suggestions on areas you can save.

Unsecured loans are loans that are not backed by collateral and typically have higher interest rates than secured loans.

The PRA is a United Kingdom financial services regulatory body, formed as one of the successors to the Financial Services Authority (FCA). The authority is responsible for the prudential regulation and supervision of banks, building societies, credit unions, insurers, and major investment firms.

The period of time agreed on, in number of months or years over which a loan is to be repaid back to the lender.

A secure loan is supported by collateral, that the lender can possess and sell if the loan is not repaid.

A standing order is an instruction that you give to your bank to pay a specific amount at regular times, such as weekly, monthly, quarterly, or yearly.