Secured Loans and Financial Terms Explained

A Pre-Approval from a lender, based on initial personal information and credit file assessment.  This does not guarantee that you will get the finance.

After you’ve spoken with your mortgage advisor at Evolution Money we’ll send you an application pack containing the paperwork that you will need to complete your loan.

APR stands for Annual Percentage Rate and tells you how much it will cost to borrow money. The calculation considers the interest rate you’ll be charged on your loan or credit card, as well as any fees you must pay. The APR is designed to help you compare different offers, although it’s not the only thing you should consider.

APRC stands for Annual Percentage Rate of Charge and is similar to APR but is the term used for mortgages, including second charge mortgages (secured loans).  The APRC indicates the overall cost of borrowing across the whole term of the mortgage, provided the interest rate doesn’t change.  This figure should help you to compare mortgage options.

This is the one-off fee you may have to pay for your mortgage/secured loan.  You will have the choice to pay this before the mortgage/secured loan completes or add this to your mortgage.  Be aware If you add this you will pay interest on this. Also see Product Fee and Lending Fee.

Arrears are payments that were due and have not been paid.  If you miss a payment or are struggling to make the monthly repayment agreed it’s important that you contact us so we can look at what support we can offer to you.

Bad Credit or Poor Credit are terms used when people have bad credit ratings, this can come from defaulting on a loan or missing occasional payments.

This is the rate of interest that the Bank of England charges other banks and building societies when they borrow money. It may influence what interest lenders will charge and if rates will go up or down – but lenders are not obligated to do so.

Brokers are people who search for a loan that is most suitable for you on your behalf. They will then talk with the loan provider on your behalf or refer you to the loan provider to consider your application.

This is an insurance policy to protect against damage to the structure of our property.  You will need to have this as a condition of your mortgage or secured loan.

Secured loans through Evolution Money can be used for various purposes, in this case a loan for a car.

This stands for County Court Judgement and can be issued by a County Court if someone you owe money to takes court action against you.  It can stay on your credit file for up to 6 years and lets other lenders know that you have missed payments.

All customers are given a consideration period of up to 14 days before their Credit Agreement can be put in place. This gives the customer the chance to think things over without any contact from loan companies/brokers.

The Consumer Credit Act applies to unsecured lending such as personal loans, hire purchases and credit cards.  This legislation makes sure borrowers are given all the information they need before and during a loan, including the terms of credit agreements, the calculations and, in certain situations, a cooling-off period during which you can change your mind and cancel the loan agreement. The Consumer Credit Act doesn’t apply to mortgages or second charge mortgages (secured loans).

Credit reference agencies (CRAs) compile your credit report. There are three CRAs in the UK: Experian, Equifax and TransUnion. They gather information about your credit history, put this into a credit report and calculate a score for you based on this information. Lenders will ask one or more of these agencies for information about you before accepting your loan application.

Credit is money borrowed from a bank or credit provider on the condition that it’s paid back in accordance with the agreement you’ve signed, usually with interest added. Types of credit include loans (such as personal loans), mobile phone contracts, credit cards and pawnbroking.

A credit score is a number that rates how suitable you are for credit – in other words, how much of a risk you’re deemed to the lender. It is based on the financial history shown on your credit report. A higher number or score means a lender will likely lend to you, and you may be offered better deals on things like credit cards, personal loans and phone contracts.  The lower the score the higher the risk lenders will consider you to be.

A credit report is a file that holds information about your financial history. This information is used to create a credit score (See also: Credit score). A credit report will hold information such as credit activity, loans, credit cards and other forms of debt that you currently have, as well as your past credit history. It will also show if repayments have not been made on time – for example a late loan repayment.

Debt consolidation is a way of bringing together several loans or debts into a single loan (called a consolidation loan) to make your monthly repayments more manageable. The new loan might offer a longer repayment period, lower interest rate or both.

This is when a person fails to make their loan repayments and is issued with a default notice. Defaults are recorded on your credit file and may affect your credit score in future.

(Direct Debit Mandate) You will receive a DDM in your Application pack. The DDM form is used to set up your monthly repayments for your Evolution Money loan.

A one-off fee you may be charged if you decide to pay off your loan early, before the term set when applying for the loan.

Equity in a property is the difference between any outstanding loans (mortgage) on a property and the value of the property.

The Financial Conduct Authority (FCA) is an independent body that regulates the financial services industry in the UK. All credit lenders and brokers must be authorised by it to do business in the UK.

There are normally 2 sets of fees applicable to a secured loan, application fees & event driven fees.

Application Fees

Evolution charges a Product Fee and a Lending Fee, you have a choice to pay these fees upfront or add them to your total amount you borrow.

The Product Fee is charged if you have been referred to us by an introducer (including associated companies), we will pay this to the introducer for the introduction. The Product Fee is a % of the amount you borrow.

The Lending Fee is charged for assessing and processing your application.  The Lending Fee is £807.00.

Event Driven Fees

During the life of your secured loan with us, there may be circumstances when we’ll apply a charge or fee to your account. If this happens, we’ll notify you in advance to explain what the charge is for, and how much we’re charging. We’ve outlined these costs and charges in our Tariff of Fees which will be sent to you with your Binding Mortgage Offer and we update you should these fees change.

This is the term used to describe a set rate of interest that cannot go up or down during the period of the loan.

Hard credit checks leave a mark, known as a credit footprint, on your credit report. They usually happen when a company you apply for credit with makes a complete search of your credit report to assess your suitability for a loan. Too many hard credit checks over a short period of time might affect your credit score for six months, and could reduce your ability to get approved for credit in the future.

Utility providers and mobile phone companies may also perform hard credit checks when you apply to use their services.

Secured loans through Evolution Money can be used for various purposes, in this case a loan to improve your home.

A homeowner is someone who owns a residential property.

Also known as a secured loan, a loan that is taken out against your property. (See Secured Loan).

Interest is the charge made by a lender on the money that you borrow. Interest can sometimes be variable and can go up as well as down.

This is the figure that determines how much interest you pay.

These are key requirements, outlined by a lender, to determine whether you’ll be eligible to apply for a loan. They could include your income level or age.

A loan is a sum of money that’s borrowed and has to be repaid, usually with interest.

A Loan Agreement provides the borrower with a list of terms and conditions of the loan. A Loan Agreement would also detail the amount you have requested to borrow, the APR and the term (length) of the loan.

This describes the length of time over which you agree to repay your loan in full.

A lump sum repayment refers to making a payment on your loan that is more than a standard monthly instalment.

The amount paid every month by the borrower to the lender to ultimately pay off the loan and interest.

A mortgage is a loan that’s borrowed to buy a property. – Also known as a ‘first charge’ (or first mortgage) on a property. Should you take out a secured loan on your property this would be considered a second charge (or second mortgage).

The Mortgage Credit Directive is a legislation provided standards for firms providing and selling 1^st and 2^nd charge mortgages.  This came into effect on 21 March 2016.

Is where the borrowing on a property is greater than the value of the house. Evolution Money offer loans to customers with zero or negative equity.

This term covers any extra payments you make over the monthly repayment amount originally agreed with your lender.

The period in which you are entitled to decide if you want to proceed with your mortgage offer or not, this is 7 days, you can waive this right if you want.

We’ve already established that APR includes the interest rate, plus any arrangement fee/other fees. However, this interest rate won’t necessarily be the one you get if your loan’s successful, so lenders will instead advertise a ‘representative’ figure. Basically this means only 51% of successful applicants have to get it, while the rest could well end up with a more expensive loan than they applied for. If you’ve a poor credit history, you’re more likely to be among that number.

Mortgage lenders will show a representative APRC, which will usually apply to all applicants who are accepted for a loan.

A second charge mortgage is a secured loan (see ‘Secured loan’). It is an “additional” or second mortgage on a property with an existing mortgage. It allows you to use the equity (or part of it) that you have on your home.

In a sense it frees up money you have already paid into your current mortgage. It’s different to a remortgage however, which allows you to refinance the whole amount of an existing mortgage on your home.

A word of warning though: if you fail to meet repayments, the lender can file to repossess your house to settle the debt, so think carefully before taking on this sort of loan.

A secured loan means that it is guaranteed or secured against an asset or assets should you fail to make repayments. It is a way to cover the lender should you default of loan payments. For example a mortgage is a secured loan: if you fail to make your mortgage repayments your lender or bank can reposes your home as collateral.

A Self-employed loan refers to a secured loan that is designed specifically for customers that are self-employed. A secured loan through Evolution Money may be possible where most lenders will turn you away.

Unlike a hard credit check (See: Hard credit check) soft credit checks have no impact on your credit score or any future credit applications you might make. They are purely an initial look at certain information on your credit report. Companies perform soft searches to decide how successful your application would be without conducting a full study of your credit history.

Term refers to the number of years you choose to repay your loan over. At Evolution money, for example, our term for secure loans is 3-20 years.

A Third Charge is a third mortgage/loan taken out on your property.

Total Repayment is the whole amount you will have repaid on your Loan once your term has ended. The figure will be the amount you borrowed plus the interest paid over the life of your term.

This is when the interest rate you are charged goes up or down, which means your monthly interest payments could change accordingly.