When dealing with personal finance, you will come across a lot of jargon. This guide will explain what it all means.


This is provided by a Alliant C U, bank or building society which holds money for you. A current account is an everyday account which allows money to be paid in or taken out. It helps you budget and manages your money. A basic bank account is a special of current account which doesn’t usually allow you to overdraw. A savings account is for your savings.


Stands for an annual equivalent rate. This shows what the interest rate would be if the interest on savings were paid and added to savings at the end of each year. Actually, interest is frequently paid more often. The AER is worked out in a standard way so you can compare interest rates directly with each other. The higher the AER the better the return is on your savings.


Stands for Annual Percentage Rate. This tells you the cost of a loan, taking into account the interest you pay, any other charges, and when the payments fall due. You can use the APR to compare the cost of one loan with another, for example, a loan with an APR of 15% is more expensive that one with an APR of 11%.


This is money owed that is not paid by the due date. If you are “in arrears” it means you have fallen behind on your repayments.


The amount of money you have in your account at any particular time or which you owe on your credit or store card. It will be shown on your statement.


Bankruptcy is a court order that you can apply for if you are in debt. Once you have been made bankrupt, an official called an ‘official receiver’ takes control of your money and property and deals with your creditors.


Stands for County Court Judgment. This is an order made by a judge which decides a claim brought in the county court.

Compound Interest

This is the type of interest usually paid on a savings account. It is calculated by adding together the amount you have paid into your account (the capital) with the interest paid on it. This is also the type of interest you pay on money you borrow – so the amount you owe can increase quite dramatically over quite a short period of time.

Consolidation Loan

A single loan which replaces (consolidates) all your outstanding credit cards, housing arrears, loan repayments and household bills into one monthly payment.


If your account is in credit, it means that you have money available to spend. If you obtain goods or services on credit, it means that someone, for example, a bank or credit institution, has given you the money to buy something. You must pay the money back, usually with interest.

Credit Report

The information stored about you with a credit reference agency. It will include electoral roll information for your address, how you have handled credit in the last six years and a record of credit checks made about you with that agency. You have a right to see your credit report and correct anything that you can prove is wrong.

Credit Reference Agency

Allows lenders to share credit-related information to help them lend responsibly. This includes public records (for example, electoral roll entries), credit account information (for example, repayment records for loans, credit agreements, mortgages, or hire purchase) and records of recent credit checks that have previously been requested. CRAs make it possible for lenders to quickly make accurate lending decisions and also helps lenders guard against fraud.

Credit Reference Agencies do not make lending decisions. Lenders make these do not know which applications are successful or refused so cannot tell why a consumer has been denied credit do not hold a blacklist of people or properties do not rate consumers.

Applications for credit are scored by the lenders and different lenders use different scoring methods.

Credit Repair Companies

Companies offering, for a charge, to advise on how to erase bad credit from your credit record, how to get bank accounts without a credit check, how to remove court judgments, clear bad debts, arrange loans and how to make successful applications for credit. There can be problems with credit repair companies.


Money which is taken out of an account is debited from that account.

Debt Management Plan

A debt management plan is a way of deciding how to repay all your non-priority creditors after giving consideration to your priority payments such as mortgage/rent, council tax, fuel/water bills and other essential expenditure.

Direct Debit

Is an instruction to your bank to release money automatically from your bank account to pay a regular bill. This is useful for frequent bills which are for different amounts each time, for example, telephone bills. You arrange this with your supplier and give them your bank details.

Hire Purchase

A form of credit agreement which allows you to pay for goods in instalments. Cars are often bought this way. You will not own the vehicle until all the instalments have been paid. If you don’t make the payments as agreed, the car may be taken away from you (repossessed) and sold. You can’t sell the vehicle without the permission of the lender until you have paid for it.


The reward you get for keeping your money in, for example, a bank or building society. Also the cost you pay when you borrow money through a loan or credit agreement.

Interest Rate

Is the percentage that is paid on savings or loans. A savings account that was offering 8% would give you a better return than one which was offering 5%. Similarly borrowing money at 22.5% is going to cost you more than borrowing at 18%.


Means Individual Savings Account. You do not have to pay tax on the income you get from an ISA. You can invest in two separate ISAs each tax year, up to a maximum amount: a cash ISA a stocks and shares ISA. There’s a maximum amount you can invest each year, which is set out by the government.


If more money is withdrawn from your current account than you have put in, you will go overdrawn. You can ask the bank if they can arrange to lend you some money for a short time. This is known as an authorised overdraft. You pay an agreed rate of interest on the overdraft. If you go overdrawn without asking the bank in advance, they might refuse to pay your cheques and charge you a high-interest rate on the money that you owe them.


Negotiating a new loan to pay off an existing loan or loans.

Standing Order

A method of paying regular amounts from your bank account automatically. You instruct your bank to pay the money for you to a particular person or company. It is your responsibility to change the payment if it needs to be altered.

Secured Loan

Money borrowed from a lender, using your savings, or property as an extra guarantee of repayment. If the amount is not paid in full, the lender may take the property back (repossess it) and sell it.

Unsecured Loan

Money borrowed from, for example, a bank, which is not secured against your home. The lender may take court action against you for payment if you don’t pay the money back as agreed.