The jargon buster: credit made simple

Money 2 months ago

Finance doesn’t have to be stressful. We break down some of the most commonly used credit jargon.

We’re not a bank and we hope it shows. We don’t want to speak in complicated jargon any more than you want to hear it. But for those words and phrases that are impossible to avoid when it comes to finance, we’ve created our Jargon Buster Guide, so you know and understand exactly what we’re saying.

APR representative
The APR (Annual Percentage Rate) representative is the interest rate you will be charged each year on the remaining balance of your loan.

Fixed rate of interest
A fixed rate of interest is one that will agreed at the start of the arrangement and will not change throughout the life of your loan, as opposed to a variable rate which can change.

Base rate
The rate set by the Bank of England that individual lenders use to set their own business rates.

Credit rating
A score given to you based on a number financial factors, such as your past dealings with creditors and personal information. This score is determined by independent companies. See below 'Credit Reference Agency'.

Credit reference agencies
Independent assessment agencies that score individuals based on financial and personal history. This ‘credit score’ is then used by lenders to decide the creditworthiness of potential customers. Agencies include Experian, Equifax and Call Credit.

Default charges
Charges due if regular monthly repayment is missed.

Total credit charge 
The total interest that you will pay back over the life of the agreement, on top of the original amount borrowed

Total repayment
Total of amount borrowed plus any credit charges.

Monthly repayment
Agreed amount to be paid back each month over the life of the loan.

Arrangement fee
A one-off admin fee sometimes charged at the start of the agreement. Note: Hitachi Capital do not charge an arrangement fee.

Gross income
Total income earned before the deduction of tax.

Unsecured loan
A loan that is not secured against any other asset. As opposed to a secured loan that is, such as a mortgage, which is secured against your home.

Tailored quote
The ability to change the term of your loan during the application process in order to reduce or increase your payments to suit your budget.

Soft search
when a lender checks your credit report to assess your credit worthiness without leaving a footprint. This means that your credit score will not be affected by the search and other lenders won’t know your report was checked. Also known as a soft credit check or quotation search.

Hitachi Hints and Tips is intended to be informative and interesting. It does not constitute financial advice, and you should always do further research when making any financial decisions. All information was correct at date of publication.

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