The world of consumer finance can be a complex and downright scary place. Plenty of companies claim to be demystifying their services and making things easier for customers to understand, yet small print, acronyms and jargon are still common place when it comes to getting a loan.
Wonga’s instant loan service has been designed to be as simple and clear as possible to use. You won’t find a load of abbreviated nonsense here! But if you do encounter some financial fog elsewhere on your online travels, then our jargon buster will come to the rescue.
An ACH, or automated clearing house, looks after all the electronic cash transactions whizzing around every day. Each country has their own automated clearing house and they typically operate on week days only. The UK’s automated clearing house is BACS Ltd, which is owned by a number of banks and other big financial institutions on behalf of the payments industry.
AER stands for annual equivalent rate and represents the interest rate you would get if the gross interest was paid and compounded annually. It’s designed to compare the annual interest between savings accounts or investments with different compounding terms (daily, monthly, annually). It doesn’t generally incorporate one-time charges, such as a sign up fee.
An agreement is a decision or arrangement made between at least two groups or individuals. In the case of a personal loan agreement, it’s a document that formalises the terms of the loan between an individual and the lender. Signing a loan agreement holds you responsible for making the agreed arrangements for repaying the money borrowed, so always consider the cost and the terms carefully before completing any offer of credit.
APR stands for annual percentage rate and is the interest payable on the amount borrowed and other charges expressed as an annual rate of charge.
This is a fee charged by a company to cover its administration costs. Banks and building societies commonly charge such a fee for arranging large loans, overdrafts and mortgages. It’s basically another way of making money!
When scheduled loan or other credit repayments are overdue, you are classed as being in arrears. People who are in arrears may experience problems gaining further credit as it affects your credit rating. Or if the debt is secured against a property, it could be repossessed to clear the arrears. So it’s always a serious situation to be in and worth avoiding if at all possible. Being in arrears can be very stressful, so don’t bottle it up. Talk to your creditors and seek support from charitable organisations such as the Consumer Credit Counselling Service. Employees are also commonly paid in arrears - payday is at the end of a working week or month, during which salary was being earned.
Anything you own which is of financial value is an asset, from cash to property and electronic goods to investments. If you remain in arrears (see above) for a long period of time, creditors may have the right to seize some of your assets. This is definitely the case with secured loans, which are guaranteed by being tied to your property.
An insurance policy that pays money to the next of kin if the policy holder dies. The basic idea behind life assurance is that a loved one receives cash to help with funeral expenses and other costs after you’re gone.
BACS Ltd (formerly the Bankers Automated Clearing Service) is an organisation owned by a group of banks and building societies to provide a clearing service for electronic transactions in the UK.
A BACS payment is an electronic credit paid directly into a bank or building society account in the UK for a specified amount. The service is provided by BACS Ltd (see above) and the process takes around three days to clear. That’s obviously much slower than a fast Wonga loan, because we send cash to the banks of successful applicants within 15 minutes!
The amount of money remaining in a bank account or credit facility. In the case of a bank account your balance can be negative as well as positive.
Institutions where people and businesses can invest or borrow money. Banks also offer services such as exchanging foreign currencies and insurance. The ‘big four’ UK banks are Barclays, HSBC, Lloyds TSB (who recently acquired HBOS) and Royal Bank of Scotland / Nat West.
Bank loans can be for personal or business use. Personal bank loans are usually for sums of more than £1,000 and you normally repay the money over a year or more. They are frequently marketed on the basis of APR, but you always make sure you understand the total to repay as well. Bank loans can involve a meeting with your bank manager and not all people are approved even if you have used other services from the bank for a long time.
A cheque drawn on the bank or building society against either a cash deposit or money in your own bank account. A banker's draft is a secure way of receiving money from someone where cash is inconvenient or unsecure for the buyer. Banker's drafts are commonly used for large denominations.
The standard interest rate from which lenders set their rates for lending and saving products. In the UK, the base rate is set by the Bank of England every three months. The inter-bank lending rate (LIBOR, or London Inter-Bank Offered Rate) can have a big influence on the rates offered by banks too.
A cheque ‘bounces’ when the bank account has insufficient funds to honor payment. In that case the bank will return the cheque, unpaid, to the account holder. The intended receiver of the money will have not been paid and this normally incurs a hefty fee from the bank.
A personal budget shows your regular income against your regular outgoings, so you can calculate the remaining balance. You can predict a shortfall of cash, or work out how much you should have left over have to either spend or save. Creating and maintaining a budget is one of the best things you can do to get in control of your finances, so be sure to check out Wonga's free budget calculator.