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Personal loans and car loans glossary

Annual Percentage Rate (APR): The yearly interest rate you’ll pay on the loan, including fees and charges. It gives you a clearer picture of the total cost of the loan over a year.

Application Fee: Also called an establishment fee, it is a one-time fee you may need to pay when applying for a loan. This fee can either be a fixed amount or a percentage of the loan amount.

Arrears: If you’ve missed a loan repayment, you’re in arrears. It’s important to catch up on missed payments to avoid extra fees or negative impacts on your credit score.

Asset: Something you own that has value, like a car or a house. Some loans are “secured” against an asset, meaning the lender can take it if you don’t repay the loan.

Borrower: That’s you! The person taking out the loan and agreeing to repay it, plus interest.

Comparison Rate: A rate that includes the loan’s interest rate and most fees and charges. It helps you understand the true cost of a loan and makes it easier to compare different loans.

Credit History: A record of how you’ve managed debts and repayments in the past. Lenders look at your credit history when deciding whether to approve your loan.

Credit Limit: The maximum amount you can borrow on a loan or credit card. For personal loans, this is usually the total amount you’re approved to borrow.

Credit Score: A number that represents your creditworthiness based on your credit history. A higher score can make it easier to get approved for loans with better terms.

Debt Consolidation: Combining multiple debts into one loan, usually to make repayments easier or to get a lower interest rate.

Default: When you fail to repay your loan as agreed. Defaulting can lead to extra fees, damage to your credit score, and legal action.

Early Repayment Fee: A fee some lenders charge if you pay off your loan before the end of the term. Not all loans have this fee, so check the terms before you sign up.

Fixed Interest Rate: An interest rate that stays the same for the entire loan term, meaning your repayments won’t change.

Guarantor: Someone who agrees to repay the loan if you can’t. Having a guarantor can help you get approved if you have a low credit score or no credit history.

Interest: The cost of borrowing money, charged as a percentage of the loan amount. It’s how lenders make money on loans.

Loan Term: The length of time you have to repay the loan. It can range from a few months to several years.

Principal: The original amount of money you borrowed, not including interest.

Redraw Facility: A feature that allows you to withdraw extra payments you’ve made on your loan, giving you access to those funds if needed.

Repayment: The amount you pay back to the lender, usually monthly. It includes both the principal and the interest.

Secured Loan: A loan that’s backed by an asset, like a car or house. If you don’t repay the loan, the lender can take the asset to recover the money.

Unsecured Loan: A loan that doesn’t require any collateral. Because it’s riskier for lenders, it usually comes with a higher interest rate.

Variable Interest Rate: An interest rate that can go up or down during the loan term, meaning your repayments can change.

The terms and definitions provided in this glossary are general in nature and are intended to help you better understand common financial terminology. They do not take into account the specific features of the products offered by Handy Finance. Before making any financial decisions, it’s important to consider your own circumstances and whether the products and services are appropriate for you.

Approvals are subject to Handy Finance’s credit criteria and responsible lending requirements. Fees, charges, terms and conditions apply. Finance provided to approved applicants by OurMoneyMarket Lending Pty Ltd ABN 64 605 231 669, trading as ‘Handy Finance’ holds Australian Credit Licence number 488228 and is a member of the Australian Financial Complaints Authority (AFCA). The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, we recommend that you consider whether it is appropriate for your circumstances. We recommend you obtain independent advice before acting on any information in this article.