Money - A-Z Personal Loans Glossary


Annual Percentage Rate (APR)

The total finance charge (including interest, points, and other finance charges) expressed as a percentage of the amount financed.


Application Fee

Some lenders charge a fee for arranging and processing the application of your loan.


Automatic Payment

A set payment amount is automatically taken out of your account every month on the day specified.



A borrower is a person who receives funds in the form of a loan. The borrower is responsible for the repayment of the funds over a set period of time.


Collateral (or Security)

Personal property pledged as a guarantee that you will repay your loan. Property such as houses, cars, savings accounts, bonds, or certificates of deposit are commonly used as collateral.


Credit Agencies/Credit Bureaus

Organisations that collect individual consumer credit information and provide credit reports to potential lenders, employers, landlords, etc., for purposes of aiding in their decision-making process.


Credit History

A record of your current and fully repaid debts. Your credit history helps banks and other financial services providers determine whether you have a history of repaying debts in a timely manner. This will help determine your creditworthiness.


Credit Rating/Score

A credit rating or score is a points system based on your borrowing and repayment history. The credit rating is used by banks and other financial services providers to determine whether a loan should be granted based on your risk profile.



An amount owed for funds borrowed. The debt may be owed to individuals, banks, or other financial services providers.



A debtor is an individual or company that owes money.


Debt Administration

If a debtor is struggling to make their monthly repayments, a debt administrator (attorney) can apply to the court to extend the loan term. The debt administrator will then determine the money needed for the debtor's basic needs while the rest of the money will be used to pay off their debts. These payments often become a salary deduction in order to ensure that the debts are paid.


Debt Consolidation

Debt consolidation is when a debtor takes out one loan to pay off other smaller loans or debts. This is usually done to secure a lower interest rate. It also makes monthly repayments easier as the debtor is paying off one loan instead of many different ones.


Debt Review

A strategy developed by professionals or debt management organisations to help a debtor manage their debt. These organisations will negotiate the debtor's repayments and ensure that lower interest rates are charged to make the payments more affordable.



Default occurs when a debtor fails to make the necessary repayments on a loan.



The difference between the current value and the outstanding loans on a property.


Finance Charges

The total cost of interest and other charges, direct or indirect, the borrower must pay to obtain credit.


Fixed Interest Rate

An interest rate the borrower locks into at the origination of the loan and does not change during the term of the loan.


Gross Monthly Income

Gross monthly income is the amount of money earned before taxes or deductions are taken into account.



The indicator of current economic conditions used to determine changes in adjustable loan interest rate.



A debtor will be declared insolvent when he has insufficient funds and is no longer able to pay his debts. Assets may be liquidated to pay off outstanding debts.


Interest Rate

A charge for money borrowed generally stated as a percentage of the amount borrowed.


Line of Credit

An extension of credit subject to a variable interest rate that may be borrowed against when needed and paid back in the same manner and under the same terms as a loan.


Loan Agreement

A formal document that sets out the rights and obligations of the lender and the borrower.


Loan Amount

The loan amount is the amount borrowed from the lender. This is the amount that the debtor will receive in their bank account.


Married in Community of Property

In South Africa, if a couple gets married without having an antenuptial contract in place, they will automatically be married in community of property. This means that all of their assets and liabilities are merged into a single estate. The couple will then share everything they earn, including any debts and liabilities.


Maximum Loan Amount

This is the maximum amount which can be borrowed under the loan agreement.


Minimum Loan Amount

This is the minimum amount which the lender can borrow under the loan agreement.


Monthly Loan Repayment

The monthly loan repayment is the amount of money that must be paid to the Personal Loan provider every month.


Nett Monthly Income

The nett monthly income is the amount of money that is left after taxes and deductions have been taken into account.



A written promise to pay a stipulated sum of money to a party under mutually agreed upon conditions. Also called a promissory note.


Personal Loan

A Personal Loan is a financial contract in which one party borrows a specific amount of money from another party that is to be paid back over an agreed upon period of time. It is a type of loan that can be used when experiencing long- or short-term cash flow problems.


Personal Protection Plan

A Personal Protection Plan settles your outstanding loan balance in the event of your death, permanent disability or certain dread diseases.



An amount equal to one percent of the loan amount.


Prepayment Penalty

A penalty fee charged to a borrower who pays off a loan before the term of the loan is complete.


Prime Rate

The most favourable interest rate charged by lenders on a short-term loan to qualifying customers. Rates (APRs) are established as the prime rate plus an additional amount.



The loan amount borrowed, not including interest.


Secured Personal Loan

A fixed interest rate Personal Loan requires collateral or security in the form of a savings account, stocks, bonds, certificates of deposit, etc.



When a debtor can no longer fulfill his obligations towards his monthly repayments, he can be forced to sell his personal assets. These assets can be sold in order to pay off or lessen his debts. Sequestration can be a lengthy and expensive process.


Term of Loan

The time limit within which a loan must be repaid.



Rights of ownership of property.


Total Loan Repayment

This is the total loan amount plus the interest charged on the loan.



The process of determining risk inherent in a particular loan and establishing suitable loan terms and conditions.


Unsecured Personal Loan

A fixed interest rate Personal Loan that requires no collateral or security.


Variable Interest Rate

An interest rate which is tied to an index and fluctuates during the life of the line of credit.

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