What is APR (Annual Percentage Rate)?
This is the rate you’d be charged over a year for borrowing a given sum of money. It includes fees and other charges from loan processing – but not any other charges. So, for example, it doesn’t include the cost of missing a payment date. APR should be used to compare secured loans, but because not all loans have a 12-month repayment period, it’s wise to take all factors in to consideration when comparing loans.
What is a Car Loan?
Car loans are loans specifically for buying a car, as you’d expect. Payments are monthly, and you’ll know the interest rate from the start so you can work out total payments.
Your credit rating tells people what kind of credit risk you are. With a high credit score, you stand out as someone who can be relied on to make repayments. A low score will mean fewer places are willing to lend to you, and it might affect what rates are available when they do.
Who are Credit Reference Agencies?
Credit reference agencies record and track credit histories. Lenders will contact them and check a borrower’s history before working out loan details. These agencies are independent from lenders.
What is a Debt Consolidation Loan?
If you’re offered debt consolidation, what it means is that one organisation will collect your existing debts and roll them into one. You’ll only have to make one payment at a time and you’ll only need to deal with one group, and a lot of the time the debt will have a lower interest rate than those you were dealing with before.,/p>
What is an Early Repayment Penalty?
You won’t always run into this, but an early repayment penalty is a fee charged by some lenders when you make a payment earlier than was agreed in the terms of your loan.
What is a Loan Payment Deferment?
Before the first repayment, some loans have a period of a month or so with no payments expected. This is known as a loan payment deferment or, sometimes, as a payment holiday.
What is a Payday Loan?
Payday loans are small loans, between roughly fifty and a thousand pounds, which can be used to handle emergency situations ahead of your next payday before being paid off. They typically have high interest rates and are designed to be paid back as quickly as possible.
What is a Personal Loan?
Personal or unsecured loans are based entirely on your credit rating and your situation. Because they’re unsecured they’re usually charged at higher interest rates and short terms.
What is a Short Term Loan?
Much like payday loans, short term loans are designed for sudden emergencies where you need the money in hand now and will be able to pay it off shortly. Because the loans are expected to be paid off soon, high interest rates are charged.
Here are a few helpful links:
Step Change – The Debt Charity
Free advice on problem debt based on what’s best for you:
Help and guidance on Loans
Money Advice Service
Free and impartial money advice, set up by government
Advice and guidance from Which Magazine
Information on whether loans affect your credit rating
Information on what to do if you need help contacting a payday loan company