Personal Loans explained – Creation Consumer Finance

If you find loans terminology confusing, then our A – Z jargon buster should explain many of the terms you’re not sure of.

At Creation we offer unsecured loans, referred to as a ‘personal loan’. In simple terms, it’s a cash advance which is not secured against possessions such as your home.

A credit score will be used to see whether or not you’ll be accepted for a personal loan and will decide the amount of interest you’ll pay. The majority of customers will be offered the rate advertised although you may be offered a higher interest rate depending on how you’ve typically paid debts or repayments in the past.

Here are some of the most commonly used terms explained in detail to help you understand the process.

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Arrangement fee


Some lenders charge a fee for arranging a loan, usually a one-off payment. A Creation Personal Loan has no arrangement fee.

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Credit reference agencies and your credit rating


When borrowing money you agree that the lender can check your credit rating. Your credit history will be held by a credit reference agency such as Experian or Equifax. You can access your credit history by visiting a credit reference agency's website. They can be obtained at a cost of £2.00.

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Fixed repayments


This is a regular fixed monthly repayment amount, for the duration of your loan.

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Fixed interest rate loan


Your interest rate is fixed and can't be changed for the duration of your loan. Even if the Bank of England change the base rate, your loan rate will remain unchanged, giving you peace of mind.

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Second Charge Mortgage (previously known as a "Homeowner Loan")


A Second Charge Mortgage is for individuals who own their own home. The loan is secured against the property and your property may be repossessed in the event that the homeowner doesn’t repay the loan.

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Interest rate


The amount you have to pay back, on top of the amount you borrow.

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Loan


A loan is a sum of money which is borrowed and paid back, usually with interest, over a period of time.

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Loan agreement


A contract between a lender and a borrower, who both then agree  the terms and conditions of the loan, usually known as a credit agreement.

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Lending criteria


These are key requirements that you have to meet before you're able to apply for a loan such as income level or age.

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Monthly repayments


The sum paid every month to the lender by the person borrowing money to pay off the loan amount and interest.

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Overpayments


During the period of the loan, you may decide that you want to pay back a higher amount each month than you originally agreed with the lender. Any extra payment that you make over and above the monthly repayment amount originally agreed is called an overpayment.

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Payday loan


Payday loans are usually smaller amounts repaid over 30 days, and carry a higher interest rate. These loans typically cover your expenses until you receive your monthly salary. Amounts are typically between £100 and £1,000, and interest rates can be high. Some lenders don’t in fact lend if a payday loan has been taken out previously. We don’t offer payday loans at Creation.

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Representative APR


The 'representative APR' (annual percentage rate) is the interest rate we charge to the majority of our customers who apply for a particular loan amount. We may offer a different APR based on your personal circumstances and the amount that you want to borrow.

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Right of withdrawal or cooling off period


You have the right to withdraw from any loan agreement by contacting us and telling us you wish to cancel the loan. This must be done within 14 days of you receiving your signed loan agreement. You must repay all of the loan and any interest that has accrued on that loan within 30 days of telling us that you wish to cancel it.

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Secured loans


Secured loans or homeowner loans  are secured against your property – either a property you own or have a mortgage on. So if you can't meet repayments, you risk losing your property.

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Settlement figure


You can repay part or all of your loan early at any time.

Full repayment – You can repay your loan at any time by contacting us and telling us that you want to settle your loan early. We will calculate your repayment amount which will be valid for 28 days.

Partial repayment – You can pay more than your required monthly payment at any time during the duration of your loan but you’ll need to let us know, by phone or in writing, of your intention to do this.

You can pay by

  • Bank Transfer
  • Online
  • Phone
  • Cheque Payment
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Term


This is the period of time over which the loan is repaid.

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APR


APR (Annual Percentage Rate), is how much it will cost to borrow money in an average year, over the term of your loan. Its a way to compare the cost of borrowing from different lenders.

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CCJs


CCJ stands for County Court Judgment. These are usually issued if you’ve defaulted on payments of previous debt. Having a CCJ will usually affect your credit score and ability to borrow money in the future.

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Debt Consolidation


If you have outstanding debt spread across a number of other loans, credit cards or store cards, you can combine them into one loan with one fixed payment. This is called 'debt consolidation'. Although this could be an option for you, it may result in taking longer to pay off the debt and could cost you more.

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Jargon Buster

Get to grips with confusing phrases you'll come across when finding a loan