Personal Loan Terminology Glossary


Personal loans can be confusing. At Shawbrook, we’re committed to being fair and transparent with everyone that applies for a personal loan.

When looking for a personal loan you may come across some confusing jargon, so we’ve put together a useful guide to help you better understand some of the most common personal loan terms.

You can browse our A-Z list of terms below.


Acceptance rate: the percentage of applicants who are successful in their application out of the total that applied for a loan.

Annual percentage rate (APR): the annual cost of taking out a loan expressed as a percentage. This is shown to help you to compare products such as loans or credit cards. To find out more about APR on loans, read our article here.

Arrears: when you do not keep up with your monthly repayments or a payment is overdue - you may ‘fall into arrears’. The amount of arrears is accrued from the date of when the first missed payment was due.



Car loan: a personal loan for purchasing a car. Usually a car loan is used to fund the purchase of a new or used vehicle.

Consumer Credit Act 2006: this is an act of Parliament to increase consumer protection when borrowing money, extending the scope of the Consumer Credit Act of 1974.

County Court Judgement (CCJ): if you fail to pay an outstanding debt, this may result in a CCJ being issued from a County Court. A CCJ will affect your credit rating and could result in refusal of credit. Details of the CCJ will remain on a credit file for 6 years.

Credit file or credit report: a record held by a registered Credit Reference Agency displaying your credit history. It details how much debt you currently have and how you’ve managed it in the past. Lenders will refer to this when assessing your borrowing application. You can request a copy of your credit report by using a Credit Reference Agency.

Credit score or credit rating: this is what lenders use to help assess what type of borrower you are and how likely it is that you will manage your repayments. A poor credit score could indicate that you may not have managed credit well in the past and could affect your chances of acceptance when applying for a personal loan. 

Credit Reference Agency: companies that hold your credit records and pass on information to lenders to help assess your affordability and credit rating. The main Credit Reference Agencies are Experian, Equifax and TransUnion.

Credit search: before a lender can process your application, they will contact one of the main Credit Reference Agencies to obtain details of your credit history.



Debt consolidation: the process of combining multiple debts into one. Typically, this is achieved by taking out a credit card or a debt consolidation loan.

Default: ‘to default on a payment’ - this defines failing to keep up with loan repayments. This can affect your credit score and reduce the chance of future successful credit applications. If you can’t make payments on time, it’s important to contact your lender to discuss your loan terms.

Default notice: this is a formal letter which is usually sent after three to six missed payments. It should include the type of agreement, the terms that have been broken and what you’ll need to do and by when. Failure to comply with a formal default notice could result in a default being recorded on your credit file and this usually lasts for six years.



Early repayment charge or Early redemption charge: the amount of money a lender may charge if you decide to pay your loan off earlier than the agreed term of the loan. Make sure you check your loan agreement or contact your provider to best understand these charges.



Financial Conduct Authority (FCA): The FCA is a UK financial regulatory body who has the power to introduce and enforce rules which govern the UK’s financial services industry. Their role includes protecting consumers, keeping the industry stable and promoting healthy competition between financial service providers. All credit lenders and brokers must be authorised by the Financial Conduct Authority to continue to do credit business in the UK.

Fixed rate: a set rate of interest that doesn’t go up or down during the period of the loan.



Gross income: your gross income is how much you get paid before tax is deducted.



Hard credit search: a hard credit search is when a lender takes a full look at your credit report. Most hard searches stay on your report for 12 months and will be visible to other lenders. When you ask for a quote for a personal loan with us, we’ll only do a ‘soft credit search’ so there will be no footprint on your credit file unless you decide to apply.

Home improvement loan: a personal loan for funding a home improvement. Home improvement loans can be used to help fund a new kitchen, bathroom, loft conversion etc.



Interest Rate: This is the cost of borrowing money, expressed as a percentage of the total amount of credit. It is the amount the lender or bank charges to borrow its money. Depending on the type of loan this can be fixed or variable.



Joint application: an application made by more than one individual. For example, a husband and wife may choose to complete an application together.



Lending Criteria: these are basic requirements that you must meet before you’ll be eligible to apply for a loan. For example, your age, income and residential status - these can differ depending on the lender.

Lender: the organisation responsible for providing the loan. Shawbrook Bank is an example of a lender.

Loan agreement: a contract between you and the lender which outlines the terms and conditions of the loan. For example, it might include details of the loan, repayments, and terms.

Loan purpose: the reason why you’re choosing to take out a loan. For example, the purpose could be to buy a car, make a home improvement, or consolidate existing debts.

Loan term: the agreed period of time that the loan will be repaid.



Monthly repayments: the amount of money paid every month to the lender to pay back the loan which includes interest and any applicable fees.



Personal loan: an amount of money to be borrowed and repaid over an agreed period of time.

Price for risk: lenders tend to charge different rates of interest depending on an individual’s credit score. If you are deemed to be higher risk because of how much credit you already hold or how you’ve managed credit in the past, then you may be offered a higher rate compared to someone with a good credit score and strong credit file.



Quote: this is typically referring to an estimated price. When obtaining a quote for a loan you’ll see the APR rate displayed to you on the basis you meet the required eligibility criteria and are likely to be accepted. For example, when you apply for a loan with us, we’ll provide you with a guaranteed, personalised quote up-front, so you can consider it before making a decision.



Regulated: this means the product you apply for is controlled in line with rules and guidance from the regulators and by relevant legislation.     

Repayment schedule: this will outline when a borrower is to make their repayments and is set out over an agreed period, based on the loan term and the amount of money borrowed

Representative APR: this refers to the rate that a lender will offer to at least 51% of their successful loan applicants. As it’s just an example, you need to bear in mind that this may not be the rate you’ll get if you apply and you could get a rate that’s either lower or higher than the Representative APR. Find out more in our Transparency research.

Representative Example: this is a calculation based on the lenders Representative APR. If a lender includes any reference to the cost of credit when advertising unsecured credit products like a personal loan, they must show a Representative Example. This is to help you easily compare the typical cost of the product across different lenders.



Secured loan: also known as a ‘homeowner’ loan, it is a loan that typically uses your home or another asset to secure a debt. It is typically used for larger amounts; your home will therefore be at risk if you fail to keep up with repayments.

Soft credit search: a type of credit check that won’t affect your credit score. These searches are only seen by you and not other lenders which provides you with the freedom to shop around and compare financial products from a range of providers. Some lenders will only carry out a hard credit search so make sure you check before applying. At Shawbrook, when you ask us for a quote we’ll only carry out a soft credit search unless you decide to go ahead.



Total amount repayable: this refers to the total amount of borrowed money in addition to the total amount of interest and fees charged.



Underwriting: assessing the creditworthiness of a potential customer and deciding whether or not to accept their application for a loan.

Unsecured loan: a type of loan that is not secured against the borrower’s property or other asset.



Variable rate: a type of interest rate that can change over the course of the repayment term.



Wedding loan: wedding loans are simply personal loans used for funding a wedding. This could assist you in covering some or all the costs of your wedding. This could include the ceremony, reception or other costs like the wedding dress or honeymoon.

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We’re committed to being fair and transparent with everyone that applies for a personal loan. When you apply for an instant quote, it won’t impact on your credit score and we’ll give you a clear picture of your guaranteed and personalised rate from the start.

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