Jargon buster

Definition

An assessment of an individual’s ability to repay a loan.

A yearly meeting of the credit union and its members. The AGM will usually include key decision-making and voting from the members. All credit union members are invited to attend the AGM.

AER shows how much interest you would earn on your savings over a year, making it easier to compare different savings accounts. AER takes compound interest into account, which means you earn interest not only on the money you save, but also on any interest that has already been added to your account.

The rate used by lenders to help you understand the cost of borrowing per year. It takes into account the interest rate and additional charges of a credit offer. All lenders have to tell you what their APR is before you sign a credit agreement.

A way to send money between bank accounts electronically. This can be done via online banking.

Compound interest is when you earn interest on your savings, and then earn interest on the interest that has already been added.

For example, if you put money into a savings account, you’ll earn interest on your original deposit in the first year. In the years that follow, you’ll earn interest on the amount you first saved plus the interest that has been added to your account. Over time, this can help your savings grow more quickly, as the interest continues to build on itself.

Conditions may vary between accounts and providers, so always check the terms and conditions.

A condition is part of an agreement or contract. If the condition is broken, then there may be legal or financial consequences.

County Court Judgments (CCJ’s) happen when someone takes court action against you (saying you owe them money) and you do not respond. A County Court judge will make a decision on who is right. A CCJ is ‘satisfied’ if paid and ‘unsatisfied’ if unpaid. If paid within 30 days, the ‘satisfied’ CCJ may be removed from the published record.

Someone who is owed money.

The measure of an individual’s ability to repay their debts.

This is an agreement between someone borrowing money, and a lender (e.g. a bank or phone company). The customer must sign a contract or agreement in order to borrow the money or goods.

This is a detailed record of an individual’s credit history. Credit reports are used by lenders to assess creditworthiness.

This is a numerical representation of creditworthiness, based on past credit history. Often shown as three digits e.g. 560

Someone who owes money.

Combining multiple debts into a single loan repayment.

Failure to repay a loan or debt obligation on time or in full. A default can remain on your credit report for 6 years and impact your credit score and future borrowing ability.

Direct Debits tell your bank you’re happy for a company to take money from your bank account on an agreed date.

When a company makes a profit, they can pay this out to their shareholders. In our case, we pay a dividend to our members if we make a profit, this is because credit unions are owned by their members.

An interest rate that does not change throughout the time of the contract.

Some lenders will ask for a guarantee, to make sure they receive repayments. Some may ask for a guarantor, which is another person who agrees to make repayments if the customer cannot.

In the UK individuals have a yearly ISA allowance of £20,000 throughout the tax year. Any interest earned on the savings in an ISA is tax-free.

A form of debt management that works by freezing an individual’s debts for a fixed period of time. These agreements are legally binding, meaning neither you or your creditor can back out of them. They are usually fixed on a 5-6 year period, within which you must commit to paying a monthly amount towards your debt. Once the period of time is over, any money you still owe will be cancelled.

The shareholders of a company are its members. The credit union is a non-profit organisation and is owned by its members.

Personal APR is the rate of interest that you are actually given. The lender will usually decide what rate to offer you based on how your credit and financial affordability matches their criteria.

Representative APR an advertised interest rate shown by lenders. Individuals who are approved for a loan may not be eligible for the representative rate, as it could be higher based on credit and affordability criteria.

Lenders (like credit unions and building societies) who act in their members best interests to ensure they don’t experience financial hardship.

Secured loans are usually tied to property e.g. a mortgage. If you don’t keep up with the loan repayments, your lender can sell your home to get its money back.

When a customer instructs their bank to pay a regular amount from their bank account to another bank account.

Unsecured loans are also referred to as personal loans. They let you borrow money and make monthly repayments (including any interest and or fees that the lender charges). Unlike a secured loan, an unsecured loan doesn’t put your home at risk. This is why unsecured loans tend to have higher interest rates, lower borrowing amounts and shorter terms than secured loans.