Borrowing Money - The Jargon
Loan Jargon D-L
Daily interest
Interest on a loan that is calculated on a daily, rather than monthly,
basis
Default
A term given to the borrower when a payment on a loan has been missed.
The borrower is said to be in default.
Deposit
The amount of money that the borrower is required to put toward the
purchase price before the loan is awarded. Typically, lenders will only
lend out a percentage of a purchase price, for example, 90% and the
borrower must find the other 10%.
Early Redemption Fee or Early Repayment Charge
A fee payable on complete settlement of the loan before completion of
the full term, calculated within limits applied under the Consumer Credit
Act 1974, and payable instead of the amount of interest and other charges
which would have been payable had the loan run to the end of the term.
Early repayment period
In some loan contracts, there is a penalty charge if a loan is repaid
too early. In these cases, an ‘early repayment period’ is
specified where the charge will be applied if the loan is paid off.
Equity, Positive
The amount by which the value of an asset exceeds the amount owing on
the loan.
Equity, Negative
The amount by which the amount owing on a loan exceeds the value of
the asset.
Fixed rate
Fixed rate refers to an interest rate charge that will not change throughout
the life of the loan.
Forbearance
A lender’s delaying of legal action (foreclosure) in order to
allow the borrower more time to address late or non-payments.
Foreclosure
The legal process that occurs when a buyer defaults on a loan. The lending
institution has the right to seize the property or asset because of
non-payment.
Forfeiture
The relinquishing of property, money or privileges by a borrower who
cannot service the loan.
Grace period
A specified amount of time to make a loan payment after its due date
without penalty.
Guarantor
Someone who assumes and accepts responsibility for the loan in the event
that the principal borrower defaults. The person is effectively guaranteeing
that the borrower will make all the repayments on the loan, and will
be responsible for any outstanding amount in the event they don’t.
Income protection insurance
Insurance to cover the borrower in the event that they lose their main
source of income. Income protection insurance is normally provided by
third parties, and as such there can be major differences in features,
conditions and cost.
Interest
The cost of borrowing money. Normally expressed as a percentage of the
loan amount.
Joint liability
When two people sign their names to a loan agreement, they are both
responsible for the loan amount – jointly and singularly.
Late charge
A penalty charge against the borrower for late payments. Sometimes accompanied
by higher penalty interest charges also.
Loan period
The lifespan of the loan agreed to by the lender and the borrower. Normally
expressed in terms of years or months.
|
