Debt Consolidation Glossary

APR
An APR is the annual percentage rate of a loan. This quantifies the total charge for credit as a standard measure which borrowers can use to compare the credit charges from one lender to another regardless of how they make the repayment calculation.

Charging Order
This is an order which is obtained by the creditor and imposed/reinforced by the court, to collect outstanding unsecured debt. It gives the creditor priority over assets should the property be sold, and when made absolute can be used to force sale.

Insolvency practitioner
A Licensed Insolvency Practitioner is an authorised person who specialises in insolvency, usually an accountant or solicitor. They are authorised either by the Secretary of State for Trade and Industry or by one of a number of recognised professional bodies.

Individual Voluntary Arrangement (IVA)
This negotiated settlement between a borrower and their creditors which allows the debtor to repay a reduced debt in affordable monthly instalments over a fixed period of time, usually five years. The terms of the IVA will depend on your personal circumstances but can ultimately allow for a proportion of the debt to be written off. One advantage of an IVA over bankruptcy is that you will usually be allowed to keep your home if you meet your obligations under the agreement.

Loan to value
This is the ratio of the amount of any loan to the valuation of the property.

Non-status borrower
A borrower with an impaired or low credit rating who would find it difficult generally to obtain finance from traditional sources on normal terms and conditions.

Rule of 78
A formula used by lenders to calculate an early settlement figure for instalment loans.
For a loan paid back in 12 monthly instalments, since 1 + 2 + 3 etc + 11 + 12 = 78, 12/78ths of the interest is owed after the first month, 11/78ths after the second month, and so on until 1/78th of the interest is owed at the end of the 12th month.

Second charge mortgage
A loan borrowed against the equity in the borrower's property. It is called a Second charge mortgage because it is in addition to the first mortgage.

Secured loan
A loan secured against property usually your home, which could be at risk if you do not keep up repayments on the loan.

Total charge for credit
The total charge for credit includes interest and other charges payable under the credit agreement and linked transactions.

If you would like more information, ring Debtsolver now on Telephone 08000 434 336 (Free for UK residents only).