Jargon Buster
Puzzled by jargon?
Like most financial topics, debt solutions in Scotland involve lots of confusing jargon.
Here, we’ve put together straightforward explanations for all the most frequently-used technical and legal words and phrases.
Just click on the jargon to find out what it means…
A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z
A
Jargon A
This is the total value of the mortgage amount loaned to you.
This is the publicised interest rate for a mortgage or loan that allows you to compare different offers from a variety of lenders on a like-for-like basis. It includes all the likely fees and charges.
This is a fee that may be charged by a lender for setting up a mortgage, or to allow you access to a discounted or fixed rate mortgage product.
If you fail to make the contractually agreed payments on any loan, mortgage or other household bills, you will fall into arrears. Serious arrears (eg. mortgage, rent and council tax) must be paid urgently. Arrears also apply for missed payments on any unsecured debts. If you carry on missing contractual payments, your arrears will grow, and you may have to make extra payments over and above your regular payment amounts in order to clear the arrears.
This is the collective term for all the items you possess that are worth money. They typically include things like your home, car, stocks and shares, savings, investments, antiques, etc.
Assignment occurs when a creditor physically sells on your debt to another company. This is different to a creditor simply employing a debt collection agency to collect the debt on their behalf.
If a Decree is awarded against you and you don’t make the required repayments, the council may deduct money at source from your benefits to cover the repayment amounts – this is known as Attachment of Benefits. It is similar to an Attachment of Earnings, which can be invoked by the council if you are employed.
This diligence involves the creditor trying to seize cheques or money that you hold. This cannot be used to seize money you hold in your home.
Attachment Of Property Outside Your Home
This diligence involves trying to seize and sell your personal property situated outside your home, such as a car worth more than £3,000.
Available Surplus (Available Income)
Once you subtract all your basic outgoings (eg. housing, travel, food, clothing, insurances, etc.) from your income, the surplus amount that’s left is known as your Available Surplus or Available Income. This is normally the amount that you would be expected to pay over to your creditor(s) whilst you’re in a debt repayment scheme like a DMP or DAS.
B
Jargon B
This is a lump sum payment (normally the final instalment) on a conditional sale agreement or hire purchase (HP) scheme. Balloon payments are most often used with car finance, where the purchaser makes monthly payments for an agreed period of 2-3 years, and they can then either hand the car back, or make the final lump sum (balloon) payment and keep the car.
This diligence will freeze your account until you give permission for an amount to be released to pay the debt due in full, or at least a lump sum towards it.
The Bank of England sets this base interest rate. Interest rates charged by lenders are often influenced by changes in this base rate.
C
Jargon C
Capital & Interest Mortgage (Repayment Mortgage)
With a repayment mortgage, your monthly repayments go to paying off the original amount you borrowed as well as the interest charged on the loan. This means that as long as you make all the contractual payments, once you reach the end of the mortgage term, your mortgage will be fully paid off.
With some mortgage products, the lender guarantees that your mortgage interest rate will not go above an agreed level, regardless of any changes to the base rate set by the Bank of England.
This is a lump sum cash payment sometimes paid by lenders to borrowers on completion of some mortgage products.
This is a formal demand for payment, following a Decree. A Sheriff Officer usually serves the Charge for payment and you have to pay the debt within 14 days of it being served, or the creditor may take diligence against you.
When you’re buying a house, this is the final stage of the mortgage arrangement process and signifies the point at which ownership of the property is officially transferred to you. If you’re remortgaging, this is the point at which your mortgage is transferred from the original lender to the new one.
When you sign a credit agreement, loan agreement or mortgage application, these are the regular repayments you agree to make as part of the contract between you and the lender. If you don’t make these contractual payments, your mortgage, loan or credit account will fall into arrears, and this could affect your credit score.
When you buy a property, the conveyancer is the legal expert who is responsible for arranging the contract between you and the lender.
This recently-coined phrase refers to a dramatic decrease in the general availability of credit, mortgages and loans due to economic factors. It can also mean a rise in the cost of obtaining credit from lenders like banks, building societies and other loan providers.
This is a record of your historical financial performance, showing all your previous applications for credit (whether approved or declined) and how you have managed any credit, loans and mortgages you’ve had in the past. It is held by a number of officially-approved organisations (Credit Reference Agencies) who make this information available to lenders who are considering whether or not to offer you credit in the future.
This is an officially-approved organisation that holds records of the use of credit by individual people in the UK. Most lenders check the information held by credit reference agencies when they are deciding whether or not to provide credit to a customer.
There are some organisations in the UK that claim they can help people to ‘repair’ their credit file by removing Decrees, thereby making it easier for them to get further credit in the future. These organisations charge a fee, and they normally just advise the debtor to apply to the courts for their Decrees to be removed on (normally) false grounds. Several of these credit repair organisations have been prosecuted in recent years, and one director was sent to prison for conspiring to defraud the public.
Most Credit Reference Agencies allocate a ‘credit score’ to individuals – lenders then use this to create their own credit scoring process (based on their own criteria) when considering whether or not to lend money to a client.
This is the general term for any person or organisation that has lent money to you. In most cases, creditors are banks, building societies and credit card companies, but other types of creditor include mail order companies and payday loan companies.
D
Jargon D
If you are unable to maintain contractual payments to a creditor, they could claim through the Sheriff’s Court for a decree against you. This allows a creditor to take further diligence against you.
This is a debt solution that allows you to repay your debt in full at a more affordable rate, and where legal action is stopped, and interest and other charges are frozen for as long as you maintain your payments. It is usually administered through a debt management company, who will formulate a Debt Payment Programme (also known as a DPP) that outlines to your creditors exactly how much you can afford to repay.
These are organisations that are hired by creditors to chase outstanding debts from debtors on their behalf. If you are approached by a debt collection agency regarding a debt you owe to a creditor, simply treat them in the same way as you would the creditor themselves.
Also known as a DMP, this is a scheme whereby you arrange with your unsecured creditors to make reduced payments to them, often over a number of years, to pay off your debt in full. The reduced payments are calculated based on what you can afford to pay each month, after a detailed incomings and outgoings review to cover all your basic living expenses and any priority debts.
This is an order which can only be made by the CSA (Child Support Agency) for deductions to be made from earnings towards maintenance payments. Unlike a normal Arrestment of Earnings Order, the CSA doesn’t need a court to sanction this.
This is an order which can only be made by the CSA (Child Support Agency) for deductions to be made from earnings towards maintenance payments. Unlike a normal Arrestment of Earnings Order, the CSA doesn’t need a court to sanction this.
If you fail to make contractual payments to a creditor, they may issue a Default Notice to make you aware that they intend to take further steps to recover the debt.
If your outgoings are more than your income, this results in a deficit – ie. more money is going out than coming in. The only ways to reduce this deficit are to increase your income or reduce your outgoings, or both.
This is a general term for anyone who has no income and relies on someone else to pay all their living expenses. The most common types of dependent are children and homemakers.
Detailed Building Survey (Full Structural Survey)
This is the most in-depth form of survey that can be carried out on a property. The survey will uncover any minor and major problems with the structure of the property and will highlight any repairs that may be necessary.
This is action your creditors can take if they have a Decree or Summary Warrant against you. Types of diligence include Bank Arrestment, Earnings Arrestment, Attachment of Property, Attachment of Money, Exceptional Attachment, Inhibition, or Diligence on the Dependent.
Creditors may apply for this while they are waiting for a summary warrant or decree to be granted against you. They may use this to protect their interests if you are likely to dispose of assets before the summary warrant or decree is granted.
Some mortgage lenders offer a discount off their own standard variable rate as an incentive to new customers. The discount lasts for a set time period. This doesn’t mean that the interest rate and mortgage payment amounts won’t change during this period, as it will change in line with any amendments to the lender’s standard variable rate.
This term refers to the right held by any creditor to whom rent is owed, to sell their debtor’s goods to cover any rent arrears.
E
Jargon E
This is a fee that may be levied by a mortgage lender if the mortgage is paid off earlier than the originally agreed term.
Once a creditor has served a charge for payment on you, and the time limit on it has run out, the creditor may ask your employer to deduct money directly from your wages to cover the payments.
If a property’s market value is more than the total outstanding mortgage on it, the difference between the two figures is known as ‘Equity’. ‘Negative Equity’ occurs when the market value of a property is less than the total outstanding mortgage/loans secured on it.
Sometimes a lender may make it a condition of approving a mortgage on a property that certain repairs must be made to it before they will lend the money. These are known as Essential Repairs, and the mortgagee will need to provide satisfactory proof that the repairs have been carried out before the mortgage can proceed.
This diligence may be used if a creditor thinks you have valuable property in your home. They cannot attach items that are reasonably required, such as bedding, clothing and basic household furniture.
If an application is made to a court (eg. by a lender) without attending the court in person, this is known as ‘ex-parte’ or ‘without attendance’.
F
Jargon F
Financial Ombudsman Service (FOS)
If you have a complaint against a financial services provider, and your complaint remains unresolved even after you’ve been through the provider’s own complaints procedure, the FOS offers an independent arbitration service. To take advantage of this service, you must have made a complaint to the provider and given them sufficient time to investigate the problem. FOS, South Quay Plaza, 183 Marsh Wall, London, E14 9SR.
With a fixed rate mortgage, the interest rate charged and your monthly mortgage payments will stay the same for the full duration of the fixed rate period. Changes to the Bank of England base rate and/or the lender’s own standard variable rate will not alter your monthly payment. At the end of the fixed rate period, the interest rate charged may simply revert to the lender’s standard variable rate, or to another rate specified in advance by the lender.
This is the general description for a mortgage that may allow you to do one or more of the following without penalty: take payment holidays, make overpayments, or make underpayments.
If you deliberately deceive another person (or organisation) with incorrect information in order to gain an advantage, you are committing fraud.
Full Structural Survey (Detailed Building Survey)
This is the most in-depth form of survey that can be carried out on a property. The survey will uncover any minor and major problems with the structure of the property and will highlight any repairs that may be necessary.
G
Jargon G
Prior to filing for bankruptcy, debtors sometimes transfer some of their assets (eg. a property, a vehicle or any other item of value) over to a member of their family or a friend, in an attempt to avoid it being included in the bankruptcy proceedings. If this is suspected by the Official Receiver or Trustee in Bankruptcy, they have the power to look at the debtor’s financial records from the last 10 years to see if any assets have been sold or transferred for lower than market value. If this has occurred, the Official Receiver (or Trustee) can order the property to be sold, and any resulting equity being made available to repay the creditor(s).
In some cases, a person can act as ‘guarantor’ for a loan taken out by someone else (the debtor). By doing this, the guarantor commits to make the repayments if the debtor fails to do so.
H
Jargon H
If a loan or mortgage is higher than a specified percentage of the market value of the property, the lender may charge this one-off fee at the beginning of the loan.
This term refers to any arrangement whereby a person pre-agrees to buy an asset and takes possession of it at the outset of the arrangement. As long as the person makes the contractual payments in full and on time over the agreed period, the asset becomes their property at the end of the period. This process is most commonly used for buying cars and household appliances.
I
Jargon I
If the Trustee in a case of sequestration believes that the debtor can afford regular payments into the sequestration, they may make an Income Payments Order. Any funds collected in this way are distributed amongst the creditors by the Trustee.
Also known as ‘price inflation’, this normally means a general rise in the price of goods and services over a period of time.
If you arrange with your creditor(s) to make reduced payments to them over a period of time to clear your debt(s) without the involvement of a 3rd party, this is normally described as an Informal Arrangement.
This prevents you from selling property such as your home, or any land you own. An inhibition normally lasts for five years, but can be renewed by the creditor.
If you cannot pay your debts when the contractual payments are due, or your debts exceed your assets, then you are classed as being insolvent.
This is the name for a recognised and licensed person who specialises in dealing with insolvency. They handle all the arrangements in a Trust Deed.
If you have an interest-only mortgage, your monthly repayments only go to paying off the interest charged by the lender for the loan, and not the original amount borrowed. This means that at the end of the mortgage term, you will still need to repay the total sum you borrowed at the outset. Most people arrange to pay this amount off using an investment product, like an ISA (Individual Savings Account), an endowment policy or a pension lump sum.
J
Jargon J
When you take out any loan, mortgage or other borrowing with another person in joint names, then both of you are fully liable for the full amount. Therefore, if one of you stops making repayments (as can happen following separation or divorce) the creditor can require the other person to repay the full amount of the debt. However, credit card accounts are never issued in joint names – only one person is the actual account holder (even if one or more other people have cards on the same account). In this case, only the main account holder is responsible for repaying any debts.
K
Jargon K
This document is produced by all lenders and sent to the mortgagor prior to arranging a mortgage – it contains all the information you need to know, including monthly payments, interest rates, and fees/charges, and the total amount repayable over the full mortgage term.
L
Jargon L
Any person or organisation that lends money (normally a bank, building society or credit card company)
This is the route into bankruptcy for people who have low income and low assets. Low income means gross weekly income of no more than the national minimum wage, and low assets means that you have no single asset worth more than £1,000 and total assets worth no more than £10,000. In addition, you may not own a house or any other property or land.
This describes the point at which a company, business or organisation goes bankrupt or is terminated. The company’s remaining assets are sold to raise funds to pay off any debts to creditors. If any money remains after all the creditors have been paid, this is divided amongst the liquidated company’s shareholders.
Normally expressed as a percentage, this is the amount of outstanding mortgage compared to the market value or purchase price of a property.
M
Jargon M
This is a legal document that is used to establish a mortgage on a property.
This is a type of insurance policy that will cover your mortgage payments for you if certain unforeseen events occur – typically in cases of redundancy, accident or sickness.
This is the duration of a mortgage – the amount of time over which you are contractually obliged to repay the loan.
N
Jargon N
This is the term used to describe the situation which occurs when the current market value of a property is less than the total value of all the loans and mortgages secured on it.
Also known as Secondary Creditors, these are creditors where non-payment will lead to less severe consequences than non-payment to Priority Creditors.
P
Jargon P
This is the general term for a mortgage that allows you to transfer it to a different property without having to pay an early repayment charge.
Unlike non-priority creditors, these are creditors where non-payment can incur severe consequences, for example imprisonment, the withdrawal of essential services (eg. gas, water, electricity, etc.), or the loss of property (eg. mortgage or rent). Council Tax, court fines and maintenance payments are also classed as priority debts.
In the case of a Trust Deed or Sequestration, this form can be lodged by a creditor to establish their claim against the debtor.
Literally translated, this means ‘in proportion to’. In a Debt Management Plan, for example, if you owe £9000 to Credit Card A and £1000 to Credit Card B, and you have a total of £100 surplus monthly income, pro-rata payments would be £90 per month to Credit Card A and £10 per month to Credit Card B.
This is the term for a person assigned by a creditor to attend a creditors’ meeting and vote on their behalf.
R
Jargon R
This is the replacement of an existing mortgage with a new one, without moving home. This may be done by taking a mortgage with a new lender, or by changing your mortgage deal with your existing lender.
Repayment Mortgage (Capital and Interest)
With a repayment mortgage, your monthly repayments go to paying off the original amount you borrowed as well as the interest charged on the loan. This means that as long as you make all the contractual payments, once you reach the end of the mortgage term, your mortgage will be fully paid off.
If you hold a current account with a bank or building society and you miss payments on a credit card or loan held with the same financial institution, they have the legal right to debit your current account to recoup the missed payment amounts, without asking your permission first.
S
Jargon S
Secured Debt (Secured Lending)
This is any loan or mortgage that is secured against an asset (normally property, land or a vehicle). In the event of non-payment of contractual amounts, the lender can order the sale or surrender of the asset to recoup their money.
This is the Scottish term for bankruptcy. You will normally be discharged from sequestration after a year, after which time your unsecured debts will be written off. However, you may be required to contribute a monthly payment into the sequestration for three years and assets of value will be realised.
These are officers of the Scottish Sheriff’s Court, responsible for serving documents and enforcing Court Orders. They are normally employed by private businesses and charge fees on a set scale.
This is the standard rate of mortgage interest charged by a particular mortgage lender. Monthly mortgage payment amounts will fluctuate directly in accordance with any changes the lender may make to this rate.
Surplus Income (Available Surplus)
Once you’ve deducted all your basic living expenses (rent/mortgage, travel, food, clothing, insurances, etc) from your total monthly income, what’s left is known as ‘available surplus’ or ‘surplus income’.
T
Jargon T
This is an order which can be awarded by the courts, allowing them to amend the existing credit agreement on a credit card or loan. Time orders are often used in cases where the creditor refuses to freeze interest or accept a debtor’s proposed repayment plan.
This allows you time to pay a decree. If a creditor accepts the payment offer, then a decree with TTPD will be granted. If a creditor refuses the payment offer, then the Court can still grant the TTPD after the hearing. A TTPD will stop any diligence against you, providing you keep to its terms. You can apply for this before a Charge For Payment has been served.
Once the formal process of diligence has begun, such as a Charge For Payment has been served, you may be able to ask the Court for a TTPO. The effect of this is that it freezes any further diligence against you.
These are small payments made to creditors by debtors as a gesture of willingness to pay. Often, token payments may be as low as £1, but it is often viewed as being better than stopping making payments altogether.
This is a mortgage interest rate that rises and falls in the same way as the Bank of England base rate. Tracker rates are almost always higher than the base rate, but they increase and decrease automatically to mirror any changes to it. For example, if the Bank of England base rises by 0.5%, a tracker rate will also go up by 0.5%.
A Trust Deed is administered by a licenced Insolvency Practitioner, known as a Trustee. The Trustee will negotiate an affordable level of repayment with your creditors on your behalf, and then once creditors have accepted this proposed repayment, then interest and other charges are frozen while you make the agreed repayments, usually for three years. After this time, your unsecured debts are written off.
This is another word to describe the Insolvency Practitioner who is responsible for disposing of the debtor’s assets in the event of Sequestration.
U
Jargon U
Unsecured Debt / Unsecured Lending
This is the term for any money loaned to a debtor (eg. by a credit card, store card, catalogue, etc.) where the amount is not secured against any asset or other item.
W
Jargon W
Whole of market mortgage brokers have access to all the available mortgage products in the UK, not just a limited range of deals from selected lenders.
If, during a Trust Deed or Sequestration, the debtor acquires any new assets of significant value (eg. inheritance, bonus payment, lottery win, etc.) the value of the new asset must be declared to the Trustee, and used to directly repay as much of the debt as possible.