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AER Annual Equivalent Rate. This shows what the interest rate would be if interest were paid and added to your account each year. APR Annual Percentage Rate. The interest payable on what you've borrowed is added up along with other charges, including all fees. and then expressed as an annual rate of charge. The APR helps you compare the true cost of borrowing between lenders. For example for a mortgagethe APR takes into account all fees and charges applied to the mortgage as well as the monthly payments over the life of the loan. Approved person An individual who has been approved by the Financial Services Authority (FSA) to perform a FSA controlled function for an authorised person. Arrears Money that was due to be paid but has not been paid. When you are behind in payments, you are in arrears. Authorised person A person (generally, a legal person) that has been approved by the Financial Services Authority (FSA) to carry on one or more FSA regulated activities. BACS BACS (The Bankers Automated Clearing System) - is owned by the UK's major banks and building societies, and is responsible for the automated processing of Direct Debits, Direct Credits, Standing Orders and other inter-bank payments. Banker's draft A cheque drawn on the bank (or building society) itself against either a cash deposit or money taken directly from your own bank account. A banker's draft is a secure way of receiving money from someone you don't know and where cash is inconvenient. Banker's drafts are commonly used for large purchases such as homes and cars. Base rate The interest rate from which lenders set their rates for lending and savings products. It's usually based on the base rate set by the Bank of England. CHAPS Clearing House Automated Payment System. This is a system that enables money to be transferred from one bank account to another on the same day. Cleared balance/cleared funds Includes credits (cheques and cash) that have completed the clearing cycle. You can only withdraw or transfer money to another account with money from your cleared balance. Clearing cycle The process that your cheque goes through when you pay it into your account. A cheque won't be cleared if, for example, the person who gave it to you doesn't have enough money in their account. Credit balance The amount of money in your account. Credit limit The maximum amount of money that you may borrow. Credit rating A rating used by banks, insurance companies, mortgage companies and other financial institutions making loans which they use to judge an individual or company's credit worthiness. Debt An amount of money that you owe to a person or company. Direct Debit An instruction from you to your bank allowing someone to take money from your account. The amount of money taken can vary, but you must be told the amounts and dates beforehand. Direct Debits allow you to pay bills automatically from your account on a regular basis. Discounted rate A variable rate that is set at a fixed percentage amount below the lender's standard variable rate for a period of time. At the end of the period, the mortgage goes back to the lender's variable rate. EAR Effective Annual Rate. This is the amount of interest charged on an overdraft and is stated as an annual rate. Unlike the APR, the figure does not include any fees or charges. Financial Services Compensation Scheme The Financial Services Compensation Scheme is the sole financial compensatory scheme in the UK. It was set up by the Financial Services Authority (FSA) in December 2001. Fixed-rate interest An interest rate that stays the same throughout an agreed period. Gross The whole amount before any deductions (such as tax or fees) are made. Gross interest rate Interest before income tax is deducted. Hard currency A currency which is generally accepted throughout the world. Interest-only mortgages A loan on which you only pay the interest. The amount of capital you owe remains the same throughout the term of the mortgage and is due to be repaid at the end of the term. Loan Money that you borrow on condition that you pay it back. Mortgage A loan to help you buy property on condition that the company giving you the loan has certain rights, including the right to re-possess and sell the property if you don't pay back the loan. Net The amount after deductions (such as tax or fees) are made. Net interest rate The rate payable after the lower rate of income tax is deducted. (NB the rate of tax may vary, so a net rate is usually only given as an example.) Nominal annual rate The rate of interest that would apply if the interest were not added each year and if there were no inflation. Overdraft Borrowings from your current account. Overpayment Higher or extra mortgage payments that you make (usually to pay off your loan or mortgage early). p.a. 'per annum', which means 'each year'. PIN Personal Identification Number. This is the four-digit number that you enter into a cash machine when you want to take out cash, and that you use when you pay with your chip and PIN card. Never give this number to anyone, or write it down. Rate The percentage interest rate charged by a lender. Repayment mortgage A loan where you pay back some of the capital as well as interest each month. The amount you owe is gradually reduced. Standing order A method of making regular payments directly from your bank account. It's a fixed sum and you tell your bank when to start and stop paying it. SWIFT (Society for Worldwide Interbank Financial Telecommunications) An international body which sets protocols and standards for international payment systems, such as electronic money transfers. Transaction Each time you pay money into or take money out of your account, it's called a transaction. Unarranged borrowing An overdraft that is higher than your bank has agreed to. Uncleared balance The amount of money in your account including all the uncleared items in your account and any items paid in during the day. Underpayment A loan or mortgage payment that is less than the amount that you should normally pay for that month. Variable-rate interest The interest rate that you pay on your loan or mortgage. It can rise or fall roughly in line with a designated index, such as the base rate set by the Bank of England. |
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