Pay day loan
A pay day loan is a form of credit made available only to those who are in employment. It generally consists of a small amount of money and is loaned for a term of less than a month.
Bad credit history
If you have had trouble repaying loans or other forms of credit in the past then a credit agency may have you listed as being a bad debtor. This means that many companies are less likely to lend to you.
A loan calculator is a computer program that takes your loan amount and the interest rate and calculates how much you will repay overall as well as the amount you will pay in each installment.
APR (annual percentage rate)
In the UK, loan interest is always quoted in terms of the annual percentage rate or, in other words, the amount you would pay if you were to take that loan out for a year. This is the case even when you are taking out a loan for less than a year.
When a creditor gives you a loan they generally charge interest. This is a percentage amount of the sum you are borrowing that they will charge you in return for access to the cash. Charging interest enables loan providers to continue to take the risk of lending to their customers.
Some loans will require that you put up a large asset as collateral. Home owner loans or car log book loans are two common examples. If you fail to repay the loan, these assets could become the possession of the loan provider.
An unsecured loan is one that demands no collateral. You do not have to own your own home or car or any large asset. This means that a high proportion of people are eligible for this type of loan.
Another name for the loan provider is the creditor. A creditor is anyone who lends you a sum of money.
The debtor is the person who takes out the loan. In the context of loan providers this person is sometimes called the customer or any number of other synonymous terms.
Many people find it helpful to create a budget when they are taking out a loan. Budgeting means deciding ahead of time how much money you are going to spend on each of your main expenditures and sticking to it.
Total repayment amount
When you take out a loan the amount that you repay will be the amount that you loaned plus the interest rate charged and any other fees. The total repayment amount is the full amount that you can expect to repay to your creditor.
The term of your loan is the amount of time that you are given to pay it off. With a pay day loan this could be 30 days or less.