Glossary of financial terms

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Debt Consolidation

What is debt consolidation?

Debt consolidation can be helpful to you if you have, through a series of accounts and credit cards incurred significant amounts of debt. Many people find that they have reached the situation where they are struggling to make ends meet and their cash flow is in difficulty. At that point you may find it useful to take all of these debts and consolidate them. The debts are added together to make one large loan and this is then taken out with a borrower, a regular repayment programme is set. This reduces the amount of interest they are paying. Paying the interest into one place rather than to lots of different lenders reduces the amount to be paid. That will allow them to take it over a longer term as well, and therefore it reduces their monthly repayments, helping their cash flow and helping them to live more effectively.

Why might I get a loan to pay off my debts?

If you have significant debts, or debts are reaching a point where they're causing pressure on you, adding them together and repaying them through one loan can be easier. This can be helpful because you can get a lower interest rate. This will effectively reduce the amount that you have to pay each month, and this helps in budgeting.

Is debt consolidation a good idea?

For many people, debt consolidation is a good idea because it allows them to meet their obligations in terms of servicing the debt they've already accumulated. This allows people to budget more efficiently.

Are there other factors to consider in debt consolidation?

The main factor to consider when consolidating debt is that debt has accumulated from somewhere. It still has to be repaid. Therefore, at that point, if people continue to spend in the same way, without having an increased income, the problem will continue to spiral. An important thing to consider when somebody goes through a program of debt consolidation, is that they also devise a budgeting plan in order to ensure that they can meet the repayments of that consolidated debt.

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Banking Terminology

What is interest?

Interest is money that you earn on your savings and is generally paid into your savings account every month. Interest is also money that you will pay on any debts that you might have, be they on credit cards, loans or an overdraft.

What is inflation?

Inflation is the amount by which the cost of living increases each year. Generally, inflation is about 2 to 3 percent.

What is a loan?

If you find that you need to borrow some money from the bank, you can apply for a loan over a set period of time. A loan is given on the assumption that you'll pay that money back in regular instalments, plus interest.

What is credit?

Credit is any money that you borrow. You might borrow that money on a credit card, an overdraft, a personal loan or a bigger loan, like a mortgage.

What is debt?

Debt is money that you owe to somebody else. That debt might be to the bank, to another financial institution or even to another person.

What is an overdraft?

An overdraft is a credit facility that's attached to your current account. You'll make an agreement with the bank that you can borrow, for instance, an extra £5 as an overdraft. However, you will be expected to pay that money back with interest. Theoretically, there is no limit to how big your personal overdraft can be as long as you meet that bank's lending criteria.

What is a standing order?

A standing order is a regular payment that comes out of your current account to another bank account. A stranding order might be set up to pay, for instance, your rent or your mortgage. You might have a standing order to put money into your savings account each month.

What is direct debit?

Direct debit is an agreement that you have with a utility provider or someone that you pay a bill to each month. The direct debit agreement means that they can take the money for that bill directly out of your bank account when it's due.

What is cashback on a credit card?

Cashback on a credit card is a feature that is sometimes incorporated into a credit card deal where you will earn, for instance, 2% of the money back that you spend. If you spend £50 on your credit card, you'll get 2% of that back in cashback.

What is cashback at a till?

Cashback is when you use your debit card to make a purchase at the till. If you ask for £20 cashback, they will give you £20, and then take that money straight from your current account.

Don't Worry About Your Debts...

"A debt management plan can be life changing. It can give you the chance to get your life back on track and to stop worrying about your creditors chasing you for payment."

"Our debt advisors have dealt with all sorts of situations so please don't be worried about talking to them about your debts."

which debt solution is best for you?

Answer the questions below and we will send you to the best page, where you can read more about the debt solution for you.

Are you a UK resident?
Do you have at least two debts?
Do you have arrears, missed payments or bad credit?
Once your debt management plan has been arranged, are you able to make some money available each month to pay off your debts?
Are you a homeowner, and do you still owe a large percentage of your mortgage? This means that you are nowhere near paying off your whole mortgage and owning the property outright.
Do you want to speak to an advisor who can help you reduce your payments?
If you answered YES to the questions above then go ahead and read more about debt management.

If you answered NO then try the next set of questions.
Are you a UK resident and homeowner?
Do you have two or more debts amounting to at least £500?
Have you checked the criteria to make sure that you don't qualify for debt management rather than a secured debt consolidation loan?
Do you want to speak to an advisor who can help you consolidate your debts into one easy loan payment?
If you answered YES to the questions above then go ahead and read more about a secured debt consolidation loan.

If you answered NO then answer the next set of questions.
Are you a UK resident? (you do not have to be a homeowner)
Do you have more than two debts amounting to at least £500?
Have you checked the criteria to make sure that you don't qualify for debt management rather than an unsecured debt consolidation loan?
Do you want to speak to an advisor who can help you consolidate your debts into one easy loan payment?
If you answered YES to the questions above then go ahead and read more about an unsecured debt consolidation loan.

Glossary of Financial Terms

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