Personal loan terminology glossary

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Personal loan terminology

Personal loan terminology can be confusing. And when you're making important financial decisions, it's essential to know exactly what's on offer. That's why we've put together a personal loan terminology glossary to make life easier when you're considering borrowing money for home improvements, life events, or to cover those unexpected expenses. 

Annual Percentage Rate (APR)

What is the Annual Percentage Rate (APR)?

Annual Percentage Rate (APR) isn't the same as the interest rate on a loan. Instead, it's the cost of taking out your loan over 12 months shown as a percentage. APR allows you to compare the cost of loans or credit cards at a glance, using a comparison website, to get the deal that's best for you.


What are arrears?

You may have heard of the phrase "to fall into arrears”. It means that a payment is overdue. If you can't make a payment, you'll be considered in arrears from the due payment date. You may also incur extra charges for late or missed payments.

Consumer Credit Act 2006

What is the Consumer Credit Act 2006?

The Consumer Credit Act (2006) protects consumers who are thinking of taking out a loan. The CCA gives borrowers a 14-day cooling-off period. 

County Court Judgement (CCJ) 

What is a County Court Judgement (CCJ)

If you fail to pay any outstanding debt, a court could hand down a CCJ against you. A CCJ then stays on your credit file for six years. It can affect your credit score, making it hard to get a loan or mortgage in future. 


What is credit?

Credit is the ability to borrow money in the form of personal loans and credit cards. You also need to know the following terms:

  • Credit agency: reviews your credit information to see whether you're eligible for a loan.
  • Credit check or search: when you apply for a loan, the lender will ask a credit reference agency to search your credit history. They can then determine whether you're creditworthy and process your application.
  • Credit history: a record of all your credit and repayments, including defaults and early repayments.
  • Credit report: a report generated by a credit agency showing your credit history.
  • Credit score: this is based on your credit history and helps lenders assess whether you can manage your repayments. 
  • Credit search footprint: a traditional credit search can leave a trace on your credit history. 

Debt consolidation

What is debt consolidation?

A form of debt refinancing that involves taking out a personal loan to combine all your debts into one or pay off other outstanding debts.


What is a default?

When you 'default' on a payment, it means you don't keep up with your payments. A default could harm your ability to get credit in future. If you think you might be about to default, contact your lender. If you miss several repayments, you'll be sent a default notice which is recorded on your credit file for six years.

Early repayment charge

What is an early repayment charge?

You might find you can repay your loan early. If so, you may have to pay a charge. Check the terms of the loan to find out more. 

Financial Conduct Authority (FCA)

What is the Financial Conduct Authority (FCA)?

The FCA is the financial regulatory agency in the UK. It has the power to introduce and enforce rules, promote healthy competition and protect consumers. All financial brokers and lenders in the UK must be registered with the FCA.


What is a fixed rate?

A fixed interest rate doesn't go up and down over the length of the loan. Look for a fixed-rate loan if you want to be able to budget for your monthly repayment.


What is a guarantor?

If your credit history isn't good, you may need to supply a guarantor for your loan. A guarantor is an individual who guarantees that you'll repay the loan in full. They can also become legally liable to repay the loan if you can't.

Hard credit search

What is a hard credit search?

A hard credit search takes a complete look at your credit history and will stay on your credit report for 12 months. At Salad Money, we use Open Banking to assess your ability to pay back your loan, so there's no trace on your credit history.

Interest rate

What is the interest rate?

The interest rate is the charge your lender makes for borrowing money. It's shown as a percentage of the total amount of credit. 

Lending criteria

What are lending criteria?

Age, income, residential status and other criteria are the basic requirements you may need to meet to be eligible for a loan. 

Loan agreement

What is a loan agreement?

The contract between you, the borrower, and the lender. This agreement outlines terms and conditions, including repayments, rights and obligations.

Monthly repayments

What are monthly repayments?

The amount you'll repay to your lender every month. This repayment includes interest and any fees.

Personal loans

What are personal loans?

The amount of money you agree to borrow and repay over an agreed period of time.


What is a quote?

The estimated price of your loan based on your personal circumstances. A quote may differ from the advertised APR.


What does regulated mean?

A regulated lender follows the rules, guidance and legislation from regulatory bodies. In the UK, that's the FCA.

Repayment schedule

What is the repayment schedule?

The agreed period for repayments based on the amount you've borrowed and the length of the loan term.

Representative APR

What is the Representative APR?

An example of the rate you could pay for your loan. However, the actual APR could be lower or higher depending on your personal circumstances.

Secured loan

What is a secured loan?

A secured loan is a type of personal loan that requires you to put up your assets as collateral against the money you're borrowing. It's a high-risk loan that could put your home or other assets at risk if you don't keep up repayments.

Soft credit search

What is a soft credit search?

A credit search that doesn't affect your credit score.


What does the term mean?

The length of time you agree on in which to make the repayments on your loan.

Total amount repayable

What is the total amount repayable?

The amount of the loan plus the interest and any fees.

Unsecured loan

What is an unsecured loan?

This type of personal loan doesn't require you to put up your personal assets as collateral. For example, you don't need to own your own home to apply. However, unsecured loans are generally lower in value than secured loans.


What is a variable rate?

A type of interest that can change over the term of the loan. A variable rate loan means that your repayments can go up as well as down.

If you work as a key worker and are looking for a fair and affordable personal loan that's easy to understand, consider us at Salad Money. We’re a social enterprise providing small, affordable loans to meet people’s urgent needs, alongside free education to help you make wise financial decisions. Learn more about what we do.

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