CREDIT and FINANCE GLOSSARY O-Z

        
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Outstanding
When you borrow money with a credit card the amount you have yet to pay back is called the amount outstanding.

Overseas transactions
Purchases you make in a different country appear on a credit card statement in the same way as those made at home. Overseas transactions are charged in pounds sterling at the exchange rate set for the day that details of the sale reach the card issuer

Part Endowment
This describes a mortgage where only part of it is covered by an endowment policy. The balance could be arranged on an interest only basis or more commonly on a capital and interest basis.

Payment Profile
This is a record held by the Credit Agency on how you pay your credit commitments, loans, TV Rentals, Credit Cards, Mortgage etc. Based on this information other companies determine whether or not you are a good credit risk.

Payment Protection Plan - See A.S.U

Pension Mortgage
This is an interest only mortgage that is supported by a Personal Pension Plan. Interest only is paid to the lender and in addition premiums are paid into a Personal Pension Plan. On retirement a portion of the personal pension fund can be taken as a tax-free cash sum and it is this cash lump sum (or a part of it) which is used to repay the mortgage debt. The disadvantage of this type of mortgage is that the mortgage term must run through to anticipated retirement age (for the younger borrower this could exceed 25 years) and part of the retirement fund is used to repay the mortgage debt. The advantage is that the pension premiums attract tax relief at the borrowers highest rate.

Pep Mortgage
This is an interest only mortgage that is supported by a Personal Equity Plan. Interest only is paid to the lender and at the same time contributions are made to a Pep with the aim that the mortgage debt will be repaid on or before the end of the mortgage term from the proceeds of the Pep. Pep's will be withdrawn on 5th April 1999 and are being replaced by the Individual Savings Account. Existing Pep investments can remain in force and will remain both income tax and capital gains tax free. However, no future premiums will be allowed into a PEP after April 1999.

Permanent Health Insurance (PHI)
This is a type of insurance that will pay a proportion of normal income in the event that the policyholder is unable to work due to accident, sickness or disability. These policies are normally used to replace a percentage of full income rather than just the mortgage repayment but the level of cover can be selected up to certain maximum levels. This type of cover should not be confused with ASU/ASR policies, which will normally only cover the mortgage payment for a limited period of time. PHI policies can be arranged to pay income until a return to work or normal retirement age.

Personal Pension Plan
Personal Pension Plans are designed to cater for pension planning for the self employed or employed in non-pensionable employment. Contributions made to a personal pension plan are exempt from tax at the persons highest rate of tax and the retirement age may be selected at any time from age 50 to age 75. Up to 25% of the pension fund on retirement may be taken as a tax-free cash sum and it is this tax-free sum which is used to repay the mortgage debt in the case of a Pension Mortgage.

PIN
PIN stands for Personal Identification Number. PINs allow you to use your cards in cash machines. Without the PIN, it is impossible to take out money from a machine. No-one else knows your PIN - not even bank staff or the police - and you should never tell anyone what your PIN is - it's your own secret code!

Plaintiff
The person who issued the summons.

Plus
Plus is a Visa cash machine network. If you have the Plus sign on your card you can take out money from ATMs in the UK and abroad which display the Plus logo.

Premium cards
Usually labelled Gold or Platinum Cards, these cards have a minimum salary requirement and sometimes require stricter credit checks. They often carry a higher annual fee than a standard card, but will in return offer added benefits such as higher travel insurance coverage, better customer support, higher credit limits and, of course, a sense of exclusivity.
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Redemption penalty/fee (mortgage)
A charge made by the lender if the mortgage is paid off early. Only applies to some mortgages, typically with discounted or fixed rates.

Redemption penalty/fee (loan)
A charge applied by the lender if the loan is paid off early. Only applies to some loans. The amount is usually equal to 1 or 2 months' interest payments.

Redemption penalty period
A pre-set time period in which a Redemption penalty will be made if the mortgage or loan is paid off or if the borrower wants to change the terms.

Remortgage
To take out a new mortgage without moving. Usually done to switch to a mortgage deal with better terms. It may incur fees that must be set against the benefits of reducing the interest rate.

Repayment mortgage
A mortgage plan where you pay the lender interest and part of the outstanding mortgage each month. At the end of the loan period, the mortgage will be fully paid off.

Retention
This relates to monies withheld by lenders until certain mortgage conditions are met. This will normally relate to repairs or improvements to the property that the lender is insisting on.

Reward cards
Many cards have loyalty or reward programmes associated with using the card. The most common benefits are air miles, cash back on purchases charged to your card, and points accumulation against a future discount on a particular purchase.
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Secured loan<BR> Lenders may offer lower interest rates if you secure a loan against your home. This means the lender will have a claim against your home if you default on the loan payments.

Self-certification
This means the applicant declares his or her salary on the application, but does not provide other documentation as proof. Suitable for people who are self-employed, but who can not produce audited reports for the last two years, or for employees where a large part of their income is not guaranteed (bonuses, commissions, etc.) or they do contract work. Self-certification mortgages are only available from some lenders and they carry an interest rate premium.

Smart cards
Smart cards, also called chip cards, are a new type of plastic card which operate with a microchip rather than a magnetic stripe. Chip cards are still in development. Soon, however, the information stored in the chip will be anything from money in an electronic form to personal ID like your passport number or date of birth and details of organisations you might be a member of like a sports club or an insurance firm.

Stamp duty
A tax charged on purchases of property worth more than £60,000. 1% of purchase price over £60,000, 3% on purchases over £250,000, and 4% on properties worth more than £500,000. This tax is only payable when you buy and, under certain circumstances, when you transfer to another party the ownership of a property, not if you remortgage.

Standard variable rate
The mortgage lender's interest rate at any give time on mortgages that are not under fixed, discounted or capped rate conditions. This is the rate that the mortgage will have once the special conditions expire.

Store Card
Store cards are issued by certain chains of shops, department stores and petrol stations. Store cards are like credit cards, charge cards or budget cards but they can only be used in the shops or group of shops which issue them. Store cards usually carry higher interest rates than the normal, internationally accepted credit cards.

Stored value card
A new type of payment card that is emerging is the stored value card (also called electronic purse). This card will be a plastic alternative to cash for small payments such as buying a paper, a parking ticket or purchases over the Internet.

Student card
A card specially designed for individuals enrolled in universities who may not qualify for a standard card.

Summons
Issued by the plaintiff who intends to sue the defendant for money or property.

Switch
Switch is a UK debit card payment scheme. Once an issuer has joined Switch, it can issue cards which will be accepted at any outlet showing the Switch logo. Similarly, cardholders can use Switch cards to make payments in any shop displaying the logo.
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Term assurance
A Mortgage Protection policy (a type of Decreasing Term Assurance) is normally used in conjunction with a repayment mortgage. Normally at a lower premium than Level Term Assurance, this type of policy is designed to provide protection in line with the decreasing sum owed to your lender. If you choose to pay your premiums on a regular basis, these would normally be calculated to be level throughout the term.

Transaction
Transaction is the word used by people in the card industry to refer to a sale, purchase or transfer of money made using a plastic card. There are two kinds of transaction: offline and online. An offline transaction is when the shop assistant takes and imprint of the card and sends a paper voucher of the sale to the bank for processing. An online transaction is when the shop assistant swipes the card through an electronic terminal and the card details are passed by computer directly to a computer at the bank.

Unsecured loan
Most personal loans are so-called unsecured loans. This means that the lender does not have a particular asset, such as your home, to reclaim if you should stop payments on the loan before it was paid back. However, the lender may still have a rightful claim on any of your possessions up to the loan amount should you not be able to repay the loan.

Valuation
An inspection of the property, normally carried by an independent valuer on behalf of the prospective mortgage lender, in order to give an estimate of the value of the property. A copy of this report is often passed onto the buyer.

Variable rate
An interest rate that can go up as well as down. A change in rate may result in significant changes to your monthly payments, so it is wise to leave enough room in your budget to allow for an increase if taking out a variable rate loan. Changes to the variable rate are determined by the lender.

Visa
Visa is one of the main international credit card payment schemes. Visa does not issue the cards itself but instead runs the money transmission networks which link outlets, acquirers and issuers.

Visa Debit (formally Visa Delta)
Visa Debit is Visa's debit card payment scheme. Once an issuer has joined this scheme, it can issue cards which will be accepted at any outlet showing the Visa logo
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