Loans glossary
- Adverse Credit A bad credit record.
- AEA The Annual Exempt Amount is the yearly allowance for Capital Gains Tax (CGT).
- AER The Annual Equivalent Rate is the figure that helps with comparisons of one financial product with another, and is generally quoted on interest paid on savings and investments. It shows what the rate would be if interest was paid just once a year.
- APR Annual Percentage Rate which is useful for comparing loan and credit offers. It contains interest, fees and any payment protection included in the loan.
- Bank of England The BOE is responsible for setting interest rates, issuing bank notes and working towards maintaining a stable financial system.
- Base rate This is the lowest rate at which a lender will charge interest.
- CGT Capital Gains Tax is liable on gains made when you sell assets. The Annual Exempt Amount is £9,200 for the 2007/2008 tax year. The tax depends on the level of your income liable to income tax.
- CPI Consumer Price Index. This is a measurement of the average price of consumer goods and services bought by households.
- Credit rating A points rating used by banks to assess credit worthiness of an individual.
- Credit Reference Agency An agency that compiles credit records of consumers and releases the information to companies offering credit terms, such as Equifax or Experian.
- Equity Release Unlocking some of the value held in a home and turning the cash value into a stream of income.
- Fixed rate The interest rate is fixed for a specific period.
- Gross income Your income before any deductions have been made, particularly tax.
- Inflation The general rise in prices across the economy over a year.
- Interest rate The percentage at which interest is charged on a loan, or paid out on savings. The rate will vary according to the base rate and the type of loan or savings plan.
- RPI The Retail Price Index is an index of the average price of consumer goods and services used to measure the rate of inflation.
- SVR The Standard Variable Rate is the interest rate the lender charges which fluctuates with the changes in the base rate - this affects your interest payments accordingly.
