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Welcome to the Finance glossary, we have made this glossary to make you more comfortable in finding and understanding the finance terms. This is brought to you by the loan uk .
Use the A-Z alphabetical list to find definitions of key finance terms.Our aim is to provide the mostcomprehensive glossary of UK financial terms on the internet
Finance Terminology - A
Ability To Pay
A method of working out the creditworthy-ness of a customer, by estimating how much he or she will have left to make payments on a loan or mortgage after other deductions have been made from gross income.
Acceleration Clause
Allows the lender to collect the balance of a loan if a borrower misses one or more payments.
Acceptance
A positive response to an offer or a counter-offer. Acceptances may be 'conditional', 'express', 'implied' or 'qualified', depending on the circumstances of the deal and whether there are any further mitigation's, conditions or requirements.
Accident
An unexpected event, usually referring to an injury or fatality, although in some accidents it is just property that gets damaged. Although some accidents are easier to prevent than others, the financial damage can be limited by taking out accident and sickness insurance, and ensuring that your car, house and other valuable property are properly covered.
Accident Insurance
Insurance that covers you if you suffer certain injuries, such as loss of a limb or vision.
Accident, Sickness And Unemployment Insurance
Insurance cover arranged by the borrower to protect against inability to meet mortgage payments. Unemployment cover is restricted to cover certain events only. Exclusions to this insurance include dismissal due to professional misconduct or taking voluntary redundancy. The accident and sickness cover does not cover any act of self-injury or any injury related to the use of alcohol or drugs.
Account
See bank account, insurance account, credit account, trade account, foreign currency account.
Added To Loan
The additional costs associated with arranging a mortgage that include a high loan to value fee or arrangement fees, which can be added to the amount you borrow. Fees that may be added vary by lender.
Additional Principal Payment
An extra payment each month to help reduce a debt.
Additional Security
When lending exceeds a certain loan-to-value, lenders may require additional security. The simplest form of additional security is a single mortgage loan-to-value, however other security such as cash or shares may be accepted as security.
Add-On Interest
Interest a borrower pays to the lender for the duration of the loan.
Adjustment Date
Date on which interest rates change for variable rate mortgages.
Administration Charge
Any fee charged by bank or other financial institution to cover costs beyond day to day running of an account. This typically involves banks sending letters to customers to tell them they have gone overdrawn.
Administration Charge
Some lenders will reserve a proportion of the fee charged for the valuation to cover their own costs. If an application does not proceed, this part of the valuation fee may not be refunded, even if the valuation has not taken place. See valuation fee.
Advance
Amount of your mortgage/loan. See also Cash Advance.
Advice Centre
A drop in centre which can offer advice on personal issues, including financial problems such as debt, unemployment or divorce. The most popular advice centres include: CAB (Citizens' Advice Bureaux), Student Advice centres, Job centres, and some council "one stop shops".
Affidavit
A legal statement made in writing and in the presence of a solicitor or other legal professional. From the latin verb affidare; affidavit is the past tense "I have pledged".
Affidavit Swear Fee
A fee charged when a mortgage lender is required to swear an affidavit. This is a written legal statement to a solicitor in connection with mortgage arrears.
Agreement In Principle
This means you have been accepted for a mortgage or other financial product, but it will depend on issues such as a valuation report and confirmation of employment.
Annual
Any payment or report which is due once each year.
Annual Bonus
A bonus paid annually on an endowment mortgage which is dependent on the performance of the investment fund being used to repay your mortgage.
Annualised Percentage Rate (A.P.R)
An explanation to identify the true cost of borrowing and a standard in order to provide a method of comparing costs of different loans. Initially mortgage lenders were not obliged to quote an APR due to its inappropriateness in comparing mortgage loans. APR was designed to reflect the cost of different types of hire-purchase contracts that were quoted on flat and fixed basis giving headline rates which were often half the APR. It is a legal requirement that a true APR figure be provided with any loan.
Annuity Mortgage
Another term for a capital & interest repayment mortgage.
Applicant
Someone who applies for a mortgage, or other financial product.
Applicant Type
A method of classifying applicants by status or other market segment. Common types for mortgages applicants might include first time buyer, self employed, or buy to let.
Application
The process of applying for credit, or other products. The vast majority of credit applications need to be made in writing, although it may be possible for some services, such as an overdraft extension, to be arranged over the phone. Even internet based credit applications will usually require you to sign documents before the application is finalised.
Application Fee
Any charges made for an application.
Applied Or Nominal Interest Rate
Rate used to calculate interest due.
APR
See Annualised Percentage Rate.
Architect
A professional who is employed to design plans for, or extensions to, buildings. Some modifications to your house may require the approval of an RIBA recognised Architect, in order to get approval for a home improvement loan or re-mortgage. You should always check the credentials of anyone calling themselves an Architect, as it is not possible to practice as such in the UK without being a member of the RIBA.
Arrangement Fee
A fee charged by a lender for setting up the loan. Normally payable upon completion but may sometimes be added to the loan. See fee, fees added to loan, booking fee, Conveyancing fee, land registry fees, IGP, stamp duty and valuation fee.
Arrears
A late payment, or a payment after the event, for example most salaries are paid "monthly in arrears" - i.e. the first payment is one month after commencement of work.
Arrears Fee
Charges for any late payments. See late payment fee.
Asking Price
This is the initial starting price for which the property owner is looking to sell their property. It is rare for the asking price to get paid, except in a rapidly rising property market.
Assumption
When a buyer assumes the loan payments and obligations of the seller. If the purchaser defaults on the loan both the buyer and seller are responsible for the debt.
ASU
Income protection cover for loss of earnings caused by accident, sickness, or unemployment.
Atrium
A inner courtyard of a home or other property that is open to the sky.
Attic
A space in between the ceiling an the roof of your house. It can often be converted into an extra room, significantly increasing the value of a property.
Auction
The process whereby something is bought at a price that arises from a process of bidding. If you bid for and win a home at an auction you will be legally bound to buy the house.
Auctioneer
A person who controls an auction.
Audited Figures
These are a set of business accounts that have been ratified by an accountant. Self employed people may need to provide 3 years worth of figures checked by an auditor to be able to get a mortgage.
Australian Style Mortgage
A form of mortgage where the repayment period is reduced due to interest being calculated daily.
Average
The sum of any amount divided by the number count. A statistical term often used to describe financial figures, such as "average house prices", "average earnings".
Accumulation Unit
Type of unit in a unit trust where the income is reinvested automatically, thereby increasing the price of the unit.
Active Management
An active fund manager is one who tries to outperform stock market indices by skillfully selecting winning stocks.
Additional Voluntary Contributions (AVCs)
AVCs are a top-up payments made by people into their pension schemes to boost their eventual retirement income.
There are two types of AVC.
Additional voluntary contributions (AVCs). This type of top-up policy is run by employers, and contributions are normally taken from the employees pay.
Free-Standing AVCs (FSAVC). A top-up pension policy that is taken out with an investment firm, and is separate to an employer's pension scheme.
AVCs tend to be cheaper to make because the administration cost are lower as the employee will already be in the pension scheme. An FSAVC may be slightly more expensive due to an another company making the investment to make your money grow.
The total amount that can be paid into a pension from all sources, including FSAVCs and AVCs must not exceed 15 per cent of your earnings in any tax year. Tax relief is also received on AVCs at your basic rate, as with other pension contributions.
Advisory stockbroker
A broker who gives personalised advice on what shares or other investments to buy.
Annual management charge
This is a charge paid to a company for managing your investments. (This could be a fund manager, stockbroker or financial adviser).The Annual management charge can vary from 0.5 per cent to around 1.5 per cent, and is dependent upon the type of investment and the degree of advice received.
Alternative Investment Market (AIM)
Aim is designed as a separate market for the shares of smaller growing companies that are not yet ready for a full listing on the London Stock Exchange. It allows them access to investment capital without the cost and regulatory burdens of a full listing on the main market. The Aim is usually used as a stepping stone to the main market.
The shares of companies on the AIM can be risky because the companies don't have long track records and if you want to sell your investment there are not always buyers for your shares. However, there is a potential for big rewards.
Amortisation
Amortisation is (1) the gradual writing-off in value of an asset over time - allowance for depreciation, (2) Repayment of a loan by installments.
Annual General Meeting (AGM)
This is the annual shareholder meeting. All companies apart from the very small are required to have an annual general meeting by law. The background to the company's annual accounts are normally covered in the AGM as well voting for new directors.
Annual Percentage Rate (APR)
The APR is the interest rate figure that indicates the total cost of borrowing, including any charges. When you borrow money, every lender is required by law to quote this rate. The APR is the best way of comparing like with like. It was introduced as part of the Consumer Credit Act of 1974 and is mostly used for credit cards, personal loans and mortgages.
Annual report and accounts
All companies that trade on the London Stock Exchange have to provide shareholders with an annual report and accounts. The annual report and accounts show all the financial facts and figures for the year, including profits and losses, and the directors' salaries and pay increases.
Annuity
An annuity is essentially a regular income for life and is usually purchased with your pension fund when you retire. The rate of income you receive from the annuity will depend on your age and the amount of capital you invest. For example, if you are 65 years old, you will receive less as opposed to 75 years old because you are expected to have a longer life than a 75 year old. It is best to shop around rather than just accept the annuity quote given to you by your pension fund provider because there are several different options available.
Annuity Share
This is essentially another term for an income share within a split capital investment trust. It is not usually worth much at the end of the trust term because the capital value is distributed as income to the investor.
Approved Investment Trust Company
This is an investment trust company that doesn't have to pay capital gains tax on profits, that it makes from the sale of investments within its portfolio.
Arbitrage
This is the process of buying securities at a low price in one market and simultaneously selling them in another market at a higher price to make a profit.
In share trading, Investors called risk arbitrageurs attempt to make profits from an expected rise in the price of a takeover target's shares and a drop in the price of the bidding company's shares. These traders simultaneously buy stock in the target company while selling those of the bidding company. They will also invest in the target company if they think, the bidder will be forced to raise his offer price.
Ask price
The lowest price at which an investment can be sold at a given moment.
Association of Investment Trust Companies (AITC)
The AITC is the main trade body representing over 300 investment trusts.The industry has often laboured in the shadow of unit trusts, even though investment trusts are generally cheaper and can offer better returns over the long term.
Association of Unit Trusts and Investment Funds (AUTIF)
Autif is the main trade association for the retail fund management industry. It promotes investment in mutual funds, such as unit trusts and open-ended investment companies (OEICs), including individual savings accounts (ISAs) and personal equity plans (PEPs). It also lobbies government and liaises with the regulators on behalf of its members, which manage around £255 billion of assets.
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