Loans glossary

Confused about loans terminology? Our A-Z loans glossary sheds light on terms you may be unfamiliar with. It can also be used as a jargon buster, whether you're applying for a loan or if you already have one.

Application / arrangement fee

The sum the borrower may be required to pay for the loan to be set up.

Annual percentage rate (APR)

The APR represents the rate of interest and any charges you’ll pay on top of the loan amount. You’ll only pay interest on the outstanding balance.

Base rate

The rate of interest set by the B@nk of England, being in effect the lowest rate that lenders will charge interest at.

Credit rating or score

A credit rating or score is one of the factors used to assess your ability to manage and repay debt. The higher the score, the greater the chance you have of being accepted for a loan.

Credit history or credit report

A credit history or report is a record of a person's financial borrowing, including information about late payments and B@nkruptcy.

Credit reference agency

Hold credit records and pass on information to lenders seeking details of individual’s credit history. Typical agencies include Equifax or Experian.

Debt consolidation

Where various existing debts are transferred into a single loan.

Early repayment charge

A one off payment which you may be asked to make if you decide to repay your loan early.

Fixed interest rate

A set rate of interest that cannot go up or down during the period of the loan.


Defines the increase in the price of goods and services in an economy over a period of time.

Interest rate

The amount you have to pay back on top of the amount you borrow. With a loan this is also known as the APR.

Loan agreement

A contract between a lender and borrower which determines the terms and conditions of the loan.

Loans calculator

A loans calculator is usually an online tool which quickly calculates how much you’ll pay in total depending on the interest rate and loan period you choose.

Loan purpose

This is the purpose for which the loan will be used. For example, to help fund home improvements.

Loan term / period

The time period over which the loan is paid back.

Lending criteria

These are key requirements that you must meet before you’ll be eligible to apply for a loan such as income level or age.

Monthly repayments

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


During the period of the loan, you may decide that you want to make an extra lump sum payment or 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.

Repayment holiday

As the name suggests, a repayment holiday allows you to take a break from making monthly repayments for an agreed period – for example one month.

Total amount repayable

This includes the capital amount borrowed plus the interest charged.

Unsecured loan

An unsecured loan is not secured against the borrower’s property. There is usually a maximum amount an individual can borrow.

See our Guide to unsecured loans.