UK Finance Glossary
Plain-English definitions of 60+ UK loan and credit terms. Click any term to read the full definition, examples, and related guides.
A
Affordability Check
An assessment carried out by a lender to determine whether a borrower can realis…
Amortisation
The process of gradually paying off a loan through regular scheduled payments th…
Annual Percentage Rate
The full name for APR. The Annual Percentage Rate is the standardised way of exp…
APR
Annual Percentage Rate — the true annual cost of borrowing, including interest a…
B
C
CCJ (County Court Judgment)
A County Court Judgment is a court order issued against someone who has failed t…
Cooling-Off Period
A legal right under UK consumer credit regulation allowing borrowers to withdraw…
County Court Judgment
The full name for a CCJ — a legal ruling by a county court in England, Wales, or…
Credit Broker
A company or individual that introduces borrowers to lenders but does not lend m…
Credit Check
An enquiry made by a lender or other organisation to review your credit file hel…
Credit File
A detailed record held by credit reference agencies that documents your entire c…
Credit Limit
The maximum amount a lender will allow you to borrow on a revolving credit facil…
Credit Reference Agency
An organisation that collects and maintains credit data on individuals and busin…
Credit Score
A numerical rating assigned by credit reference agencies that summarises your cr…
Credit Union
A member-owned, not-for-profit financial cooperative that offers savings account…
Credit Utilisation
The percentage of your available revolving credit (such as credit card limits) t…
Creditworthiness
A lender's overall assessment of how likely a borrower is to repay their debts o…
D
Debit Order
A regular payment authorisation allowing a company to debit a set amount from yo…
Debt Consolidation
The process of combining multiple debts into a single loan, typically with one m…
Debt Consolidation Loan
A single loan taken out to pay off multiple existing debts, combining them into …
Debt Management Plan
An informal arrangement between a borrower and their creditors to repay debts at…
Default
A formal record on your credit file indicating that a credit agreement has broke…
Direct Debit
A payment instruction that authorises a company to collect payments directly fro…
E
F
FCA Cost Cap
Rules introduced by the Financial Conduct Authority in January 2015 that limit t…
Financial Conduct Authority
The UK's financial services regulator, responsible for overseeing lenders, credi…
Financial Ombudsman
The Financial Ombudsman Service (FOS) is an independent UK body that resolves di…
Fixed Rate
An interest rate that stays the same for the full term of the loan, meaning your…
G
I
Instalment Loan
A loan repaid in regular, fixed instalments (usually monthly) over a set period …
Interest Rate
The percentage of the loan principal charged by a lender for the use of their mo…
Interest-Free Period
A defined period during which no interest is charged on a balance or purchase. C…
IVA (Individual Voluntary Arrangement)
A legally binding agreement between you and your creditors to repay a portion of…
L
Loan Agreement
The legally binding contract between a borrower and lender that sets out the ter…
Loan Calculator
An online tool that allows borrowers to estimate their monthly repayments, total…
Loan Term
The agreed length of time over which a loan must be fully repaid. Loan terms for…
Logbook Loan
A type of secured loan where your vehicle (car, van, or motorbike) is used as se…
P
Payday Loan
A short-term, high-cost loan typically designed to bridge the gap to your next p…
Pre-Approval
An indication from a lender — based on an initial soft search and basic informat…
Principal
The original sum of money borrowed, not including interest or fees. As you make …
Promotional Rate
A temporary, reduced interest rate offered to attract new customers or incentivi…
R
Refinancing
The process of replacing an existing loan with a new loan — often to secure a lo…
Representative APR
The APR that at least 51% of customers accepted for a loan product will receive.…
Representative Example
A standardised illustration of the cost of a loan that UK lenders are legally re…
Responsible Lending
The principle — and legal obligation under FCA rules — that lenders must only ap…
Revolving Credit
A type of credit facility with a pre-set limit that you can draw from repeatedly…
S
Secured Loan
A loan backed by collateral — typically your home or vehicle — that the lender c…
Short-Term Loan
A loan with a repayment term typically ranging from one month to twelve months. …
Soft Search
A type of credit check that does not leave a visible mark on your credit file th…
Standing Order
A fixed, regular payment instruction you set up with your own bank to pay a spec…
T