CREDIT and FINANCE GLOSSARY D-H

     
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Debit Card
Debit cards are basically plastic cheques. When you pay by debit card the money is taken directly from your bank account within a day or two of the transaction. There is no credit involved since your account is debited the same day you make a purchase. Details of purchases are shown on normal bank statements.

Debt Consolidation
Sometimes referred to as loan consolidation, this simply represents the policy of borrowing on mortgage in order to repay other loans or debts. This can be achieved as part of a re-mortgage or by arranging a further advance from the existing lender

Defendant
This normally means YOU.

Deferred payment
When you are borrowing to buy a car, some lenders recognise that the car will probably have a trade-in value at the end of the loan period. They will therefore let you repay some of the loan amount when you sell the car at the end of the loan period. That may enable you to buy a more expensive car, since your interest payments will be based on a smaller value than the full loan amount.

Defaults
Simply a record placed by a bank or other financial institution when you take out a loan / credit card agreement which you have not paid stating you have not maintained your payments. Then they have registered that you have been issued with a Default Notice which you have set period to comply with

Discounted Rate
The lender agrees to give a fixed discount off the normal variable rate for a guaranteed period of time. This period may last a few months or several years. The discounted rate will move up and down with the normal variable rate but the payment rate will retain the agreed differential below the variable rate for the agreed period of time. If a discounted rate is taken the lender will normally impose early redemption penalties if the mortgage is repaid within the first few years (see Redemption Penalties).

Discounted variable rate
A reduced variable rate typically given to new customers as an incentive to take out a mortgage. The discounted rate will last for a set time period.
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Early redemption facility
Allows you to pay back the loan earlier than initially agreed. This sometimes carries a redemption charge.

EFTPOS terminal
EFTPOS stands for Electronic Funds Transfer at Point Of Sale. You will find EFTPOS terminals at the till in certain shops. An EFTPOS terminal electronically prints out details of a plastic card transaction. The computer in the terminal gets authorisation for the payment amount (to make sure it's within the credit limit) and checks the card against a list of lost and stolen cards.

Electron
Electron is a Visa debit card. Anything you buy with an Electron card has to be authorised electronically which means the transaction is more secure. Since you cannot go overdrawn without permission, the issuer can give a debit card to someone opening their first bank account, such as school leavers.

Endowment Mortgage
An interest only mortgage supported by an endowment policy. During the term of the mortgage only interest on the mortgage is paid to the lender. At the same time premiums are paid into an endowment policy which is designed to mature at the end of the mortgage term. The proceeds of the endowment policy are designed to repay the mortgage debt, although with a low cost endowment policy it is not guaranteed that the proceeds will be sufficient to repay the debt. In addition to providing the investment to repay the mortgage debt the endowment policy will also include life assurance which will repay the mortgage debt in the event of the death of the policyholder within the policy term.

exchange of Contracts (NOT SCOTLAND
This is the stage in the property transaction at which legally binding contracts are exchanged between the buyer and the seller. Once contracts are exchanged the vendor becomes legally obliged to sell and the purchaser to buy on the terms agreed.

Existing Liabilities
This term is used by lenders to define all other finance commitments apart from the existing mortgage. This will take into account such items as bank loans, HP, credit cards, maintenance payments (to ex-spouse) etc. Most lenders will take these items into account when assessing how much they are prepared to lend and will usually deduct 12 months payments from gross annual income before applying their normal income multipliers

Extended Credit
All credit cards offer extended credit, sometimes called revolving credit. This means you can spend as you wish provided you stay within the credit limit agreed with their issuer and pay back as much as you want provided you pay the minimum. If you stay within your credit limit, you don't have to consult the issuer each time you want to borrow more money.
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First Time Buyers (FTB or FTP)
Lenders differ in their definition of a First Time Buyer. Some lenders will include in this someone who has owned a property before but has no property to sell (i.e. may be renting temporarily after selling) and other lenders will include joint borrowers where just one party is a FTB. Other lenders will take a more literal definition and only include someone who has never owned a property before.

Fixed Rate
The lender will fix the interest rate that they charge at a set level for a fixed period of time. There are normally a whole range of fixed rate products available from different lenders and these vary in terms from very short periods (3 - 6 months) up to the whole 25 year mortgage term. The lender will normally charge early redemption penalties if the mortgage is redeemed within the fixed rate period and often beyond the initial period (See Redemption Penalties).

Flexible Mortgage Schemes
This is a term that describes a number of new mortgage schemes and is based on the fact that some of these lenders calculate the interest on the mortgage on a daily - rather than annual basis. This offers the lenders the opportunity to be more flexible with the management of the account than would otherwise be the case. That said, there is a wide range of lenders advertising that they are flexible in outlook. These will range from lenders who will offer you one account from which to base all your savings and borrowings. From this one account you will operate your mortgage, savings accounts, current account and any other borrowings. However, not all 'Flexible Schemes' are as flexible and this and some will simply offer payment holidays or an ability to overpay each month to either build up a fund to draw on at a later stage or to help redeem the mortgage early.

Flexible repayment/drawdown
Allows you to vary monthly payments to fit temporary changes in your circumstances. You can pay off some of the loan amount in months where you have excess cash (for example, as a result of a bonus or extra commission), or you can reduce payments, or even withdraw cash, when you need extra funds. Not common on dedicated car loans.

Freehold (NOT SCOTLAND)
This describes the tenure of a property where ownership of the property and land is held indefinitely. This compares with leasehold property where the property is held for a limited period of time.

Further Advance
This is an additional loan made by the existing mortgage lender and secured by the first charge on the property. The Further Advance can be used for a variety of purposes (subject to the lender's approval) such as home improvement, purchase of freehold or personal purposes, such as debt consolidation.
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Gold Card
Gold credit cards usually have higher credit limits than normal credit cards. Gold charge cards, which normally carry a higher annual fee, are often linked to an automatic overdraft. Gold cards offer a range of special "add-on" benefits like free travel insurance.

Guarantor
A guarantor is a person other than the borrower who guarantees the mortgage repayments. A Guarantor can sometimes be used to support a borrower who has insufficient income to qualify for a mortgage in their own right. The Guarantor will normally need to have sufficient income to support the new mortgage in its entirety after taking into account any existing mortgage and other commitments they have personally. The Guarantor becomes responsible for the whole mortgage repayment if the borrower defaults.

Home Buyers Report
A type of survey report that is more detailed than a Mortgage Valuation but not as in depth as a Full Structural Survey. A Home Buyers Report is often carried out by the proposed lenders surveyor and the report can then be used for the lender to replace the Mortgage Valuation in addition to acting as a detailed report for the borrower. A Home Buyers report may not be suitable for certain types of property where a Structural Survey may be more relevant. If in doubt talk to the surveyor you propose to use.
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