Glossary of Terms – Pay Day AU
Some of the words we come across when dealing with Pay Day Loans can be confusing. Here's a glossary of terms which defines each of the common terms associated with Pay Day Loans.
APR - Annual Percentage Rate. The interest payable on what you've borrowed is added up along with other charges (e.g. arrangement fees) and then expressed as an annual rate of charge. The APR helps you compare the true cost of borrowing, for example for a mortgage. The APR takes into account all fees and charges applied to the mortgage as well as the monthly payments over the life of the loan.Arrangement fee - a fee to cover administration.
Arrears - money that was due to be paid but has not been paid. When you are behind in payments, you are in arrears.
Cash Advance - a short term advance, usually on your paycheck designed to help with immediate cash needs. Paid in full on the designated due date.
Credit card - allows you to borrow money to pay for goods and services without using cash or cheques.
Credit limit - the maximum amount of money that you may borrow.
Credit report - a document that list your credit history created and updated using information from Banks, Retailers and other sources, i.e. Courts.
Debit card - debit cards are basically plastic cheques. When you pay by debit card the money is taken directly from your bank account within a day or two of the transaction. There is no credit involved since your account is debited the same day you make a purchase. Details of purchases are shown on normal bank statements.
Deafult - occurs when a debtor has not met its legal obligations according to the debt contract, e.g. it has not made a scheduled payment, or has violated a loan covenant (condition) of the debt contract.
Debt - an amount of money that you owe to a person or company.
Direct Debit - an instruction from you to your bank or building society allowing someone to take money from your account. Direct Debits allow you to pay bills automatically from your account on a regular basis.
Debt Consolidation - sometimes referred to as loan consolidation, this simply represents the policy of borrowing on mortgage in order to repay other loans or debts.
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.
Fixed-rate interest - an interest rate that stays the same throughout an agreed period.
Further advance - an additional loan made by the existing mortgage lender and secured by the first charge on the property. The Further Advance can be used for a variety of purposes (subject to the lender's approval) such as home improvement, purchase of freehold or personal purposes, such as debt consolidation.
Gross - the whole amount before any deductions (such as tax or fees) are made.
Guarantor - a person other than the borrower who guarantees the mortgage repayments. A Guarantor can sometimes be used to support a borrower who has insufficient income to qualify for a mortgage in their own right.
Interest - the amount that you pay when you borrow money. It's expressed as a percentage rate over a period of time.
Interest-free - no interest is charged on money that you borrow.
Interest rate - the rate at which you pay back interest, expressed as a percentage of the amount you borrow.
Loan - money that you borrow (e.g. to buy a new car) on condition that you pay it back.
Loan period - also called repayment period, this is the time it takes to pay back the loan. A shorter period means higher monthly payments (there are fewer months over which to spread them), but less interest paid in total on 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).
Overdraft - a facility (usually at a bank or other financial institution) enabling an account holder to borrow up to an agreed amount and often for an agreed time.
Personal Loan - loans available from banks and other financial institutions to private individuals for personal use such as the purchase of a motor vehicle, holiday or similar item. Repayment periods vary from one year to five years. No collateral is asked for or given for the loan.
Payday Loans - a short term loan designed to help with immediate cash needs. These loans carry a higher APR% since they do not require any security or guarantee. Service is almost immediate and in most cases online.
Rate - the percentage interest rate charged by a lender.
Repayment method - the means by which a mortgage is repaid. The two main repayment methods are 'interest only' and 'repayment'.
Return - the profit you get, for example, when you invest money.
Unarranged borrowing - an overdraft that is higher than your bank or building society 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.
Unsecured loan - payday loans and most personal loans are so-called unsecured loans. This means that the lender does not have a particular asset, such as your home, to reclaim if you should stop payments on the loan before it was paid back.
