Loans Glossary

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Additional Payments - These are when you pay more than your required monthly repayments. If you make an additional payment, we will apply this to your loan and this will reduce the Total Amount of Interest you pay over the term of your loan and may reduce your loan term.

Adverse Credit – A person with adverse credit has been identified as being high risk in the eyes of financial service organisations. This could be for a number of reasons such as they have a County Court Judgement (CCJ) against them, they’ve defaulted on a loan or have a history of missing payments on their debts.

Annual Percentage Rate (APR) - The APR is a single figure that includes the actual interest rate over the life of the loan as well as all the normal costs (such as administration fees or annual charges) which enables you to compare different loans.

Arrangement Fee – A fee some lenders charge for arranging your loan.  Halifax choose not to charge an arrangement fee for loans – to help keep the cost down for customers.

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Bankruptcy – This is when someone’s debt problems get so serious, they are unable to pay their existing debts and bills.  When this happens, it’s possible to apply to a court to be made bankrupt – which means that any assets you have such as savings will be used to pay off your debts. Normally after one year a person will be discharged from bankruptcy, but it will still have a negative impact on their credit rating and may stop them getting credit in the future.

Base Rate/Bank Rate – This is the interest rate set by the Bank of England for lending money to other banks. The effect the base rate will have on most customers will be linked to products that track it, and therefore have variable interest rates. If your loan has a fixed interest rate, then any changes to base rate will not impact your loan. Most Halifax loans have rates fixed for the entire life of the loan.

Budget Planner – A breakdown of your finances, organised by incomings and outgoings to help you manage your finances.

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Car LoanCar loans are personal loans that are used to fund the purchase of a new or second hand car. They are paid directly to the customer, and are unsecured, unlike car finance schemes which are paid to the vendor, and are secured against the car.

Consumer Credit Act – This is the law that governs most personal loans and other credit products such as credit cards.

County Court Judgments (CCJs) - If someone can’t pay their debts they might face a County Court Judgment (CCJ).  They will then normally have to pay the full amount owed within a month – and if this doesn’t happen, they'll be registered with the Register of County Court Judgments and the CCJ will be recorded by Credit Reference Agencies on their credit file.’

Credit - The term used to describe the lending of money from a financial institution to a individual or company.

Credit File - This file consists of details of your current and past financial activities and is held on a database by three Credit Reference Agencies: Equifax, Experian and Callcredit. Credit files are used by lenders in the assessment of applications and ongoing management for credit products.

Credit History – This is a record of a person’s credit – such as loans and credit cards – and a history of how they were repaid.

Credit Reference Agency – This agency collects and maintains details of peoples' credit records and activities such as loan and credit card applications, late payments, defaults and County Court Judgements as well as good payment records. These details are then provided to financial companies, who use them as part of their credit scoring process to decide whether or not to lend money to people. There are three main UK Credit Reference Agencies: Experian, Equifax and Callcredit.

Credit Search – A check that a lender makes with Credit Reference Agencies to find out about a person’s borrowing and payment habits. This search will appear as part of a person’s credit history.

Credit Scoring - Credit scoring is the assessment of a loan application by a lender and is used to make a decision whether to lend or not.  Lenders use information from a variety of sources in the credit scoring process, including the details on the application, data from a Credit Reference Agency or from information already held by the lender for other products held with them.    

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Data Protection Act - The Data Protection Act means that all companies that handle personal information have to comply with a number of important principles surrounding privacy and disclosure of information.  The Act also allows customers to find out what personal information is held about them and sets out rules to make sure that this information is handled properly.

Debt Consolidation LoanDebt consolidation loans can be used to bring together a range of existing borrowings – such as, store cards, overdrafts and credit cards – into a single loan. This can be suitable for you to manage your lending with one monthly repayment.

Defaults – This is when a person fails to make their loan repayments and is issued with a default notice. Defaults will be recorded on their credit file and may affect their credit score in the future.

Dependent – A person who depends on another for financial support for the basic necessities of life. A dependent is usually a child or a spouse.

Direct Debit - Direct Debit is a safe and quick way to make your loan repayments.  The repayment amount goes out of your bank account automatically on the same date every month until the loan is repaid.

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Early Settlement - This is when you repay your loan early before the end of the loan term.

If you want to settle early, we will give you a quote which will include the outstanding balance on the loan and any interest that is applicable but has not yet been added. Depending on your loan type, we may also apply an early settlement adjustment to your loan. This means that we will charge up to 58 days’ interest on the loan.

Early settlement adjustment - If you make an early settlement we will charge up to 58 days' interest. The early settlement adjustment does not apply to the Clarity Loan but may apply to other loans.

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Fixed Rate – This means the interest rate you pay on a loan, credit card or mortgage is fixed for a certain period of time. Most Halifax loans have rates fixed for the entire life of the loan. This means you know exactly what your repayments will be for the term of your loan.

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Good Credit Rating– A credit rating is based on the assessment of an individual's risk by a financial institution and is based on a variety of factors, including repayment history for existing financial products. If you have a good credit rating lenders will be more likely to offer you a loan at a lower interest rate (APR).

Gross Income – Your income before any deductions have been made such as tax and National Insurance. Gross income is usually the figure people quote when stating their salary.

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Home Improvement Loan – This is an unsecured personal loan that can be used for updating your property and could potentially add value to your home.

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Individual Voluntary Arrangement (IVA ) – When someone is faced with debts they can’t pay, an IVA is an alternative, and a less serious, option to bankruptcy. It involves making a legally binding repayment at an agreed monthly amount that the person can afford. As long as they stick to the repayment schedule then bankruptcy proceedings can be avoided.

Interest Rate – This is the interest that’s charged on a loan – worked out as a percentage.   (See also APR)

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Joint Applicants - This is an application made by two people, typically a couple – who will have what’s known as ‘joint and several liability’ for the loan. This means they are both responsible for paying all of the loan off – either together or individually. Applying jointly for a loan can sometimes strengthen the application.

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Late Payments – A late payment is when someone falls behind with a loan repayment. If they miss 1 monthly payment, or are late in making a payment, the loan will be transferred to our Collections Team and the customer will be charged a fee of £25.

Lender – This is the company who agrees to provide a loan or another credit product such as a mortgage or a credit card.

Loan Agreement - Your loan agreement is the formal contract, which outlines the terms of your loan – (the length of your loan, the amount you have borrowed, the APR, the amount and date of each monthly repayment) and is confirmation that you agree to its terms and conditions.

Loan Calculator - A loan calculator can help work out what your repayments would be for a specified loan amount and repayment term.  It will also tell you what the APR will be and can help you decide how long you would want the loan period to be and how much you can afford to borrow.

Loan term – This is the length of time over which you agree to repay the loan. So if you take a loan with a term of two years – if you make the contractual repayments on time, at the end of that period, the loan and any interest is completely paid off.

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Monthly Repayment – This is the total amount you agree to pay back each month including the initial loan amount plus interest. The monthly loan repayments will come out of your bank account each month by Direct Debit.

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Personal Loan – This means money is borrowed by an individual rather than by a business.  If you apply for a personal loan, the amount you’re offered will depend on your income, existing debt, and credit history. A personal loan can be used for a variety of purposes (home improvement, car, debt consolidation, holiday etc).

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Quote – Details of the monthly repayments and the total amount to be repaid for a specific loan.

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Repayment Holiday – A repayment holiday allows customers to take a break from their regular monthly loan repayment, for one month. This repayment will then be added to the end of the loan and additional interest charged as a result. A customer may take no more than 2 repayment holidays in a 12 month period and these are subject to status.

Repayments – This is the monthly amount you agree to repay when you take out the loan. Once the loan has been completely repaid, you'll no longer need to make any repayments.

Representative APR - The Representative APR is most helpful when comparing one loan against another – to see which is better value. It is calculated by looking at the rate 51% of customers are expected to receive when applying in response to a particular advertisement.

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Secured Loan – A secured loan is when you ‘secure’ the money borrowed against the value of your property or other asset – which is then used as a guarantee that the loan will be repaid. If you cannot repay your loan then the lender can get a court order to sell your home/asset so they can recover the money they lent you.

Settlement Figure – This is the figure provided to you if you want to pay off your loan early – before the end of the loan term. It may not be the same as the amount you see on your Online Banking because of the interest yet to be added.

Single Applicant – This is when an application is made by one person who will be solely responsible for repaying all of the loan.

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Term – This is the length of time over which you agree to repay the loan.  See also ‘Loan Term’.

Total Amount Payable – This is the total amount you will have to repay on a loan and is based on the amount of the loan, the length of time you are repaying it (otherwise known as the term) and rate of interest on the loan.

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Unsecured Loan – An unsecured loan is when a person doesn’t have to use their home/other asset to ‘secure’ the money they are lent. This means that if they defaulted on the loan, their home/other asset would not be under threat.

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Variable Rate – This is when the interest rate you are charged goes up or down. This means your monthly interest payments could change accordingly. All our current loans have a fixed interest rate.

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