Need to take out a small personal loan? – All the Jargon explained!

If you’ve decided that you need to take out a small personal loan there are many things that you first need to consider as discussed in my previous post. When applying for a loan there can be a lot of jargon that companies will use and I’ll attempt to help you through what some of it means.


APR is perhaps one of the most commonly misunderstood terms when it comes to personal loans. We’ve all been there, watching TV, an advert for a Payday Lender comes up and you think to yourself “Wow 2000% interest, that’s extortionate!” But APR isn’t actually the interest you’ll pay back on a loan. APR stands for Annual Percentage Rate, this is basically what percentage you could pay back if the loan went on for a year and takes into account all of charges that could ever be added. Displaying your APR is a legal requirement for all loan companies, it’s meant to be a way of comparing them all. It can be a little bit confusing as the shorter the life of the loan, the higher the APR will be. As a Home Collected Credit (Doorstep Loan) Company we offer loans at a set 45% -interest over 29 weeks, this makes our APR 294.4% if our loans were over 15 weeks, then our APR would go up to near 600% even though the interest stays exactly the same. So always make sure you find out what the actual interest of a loan is, not just the APR.

Secured/Unsecured Loans

You’ll often see that some companies offer secured loans and some companies offer unsecured loans. There is a very important difference between the two. A secured loan means that the loan you take out is secured against an item (normally one that you’re purchasing with the loan or finance). If, for example, you were taking out a car on finance, the finance or loan would be secured against the car that you buy. What this means is that if you stop paying this loan or fall too far behind on the repayments, the company can take the car back. An unsecured loan is, as you would imagine, not secured against anything. This means that the company you take the loan from won’t be able to take back anything if you fall behind with repayments (Be careful though as there could be other consequences).


If you take out a loan and then miss payments you will be in arrears. Being in arrears simply means that you are behind on your repayments. As a Home Collected Credit Company (Doorstep Loans) we measure our arrears in two ways, how many weeks in arrears are you and how much in arrears are you. If you’re agreement is to pay £10 a week and you miss a weeks payment then you are 1 week in arrears, you would also be £10 in arrears. It’s important to make sure you know if the company you borrow money from charges you extra if you do miss payments or go into a certain level of arrears.


There are some companies that offer loans such as the Home Collected Credit (Doorstep Loans) industry that will offer rebates. Rebates are sometimes known as early settlements. Quite simply, a rebate or early settlement is an amount of money that the company will give you back if you pay off your loan early. Usually, the earlier you pay your loan back, the more of a rebate you will get.

Credit Agreement

A Credit agreement is the contract that you sign with the company lending you money. In this contract it will list all the important information such as how much you’ve borrowed, how much repayments are, how long the loan is taken out for etc. The credit agreement is also where all the other important information is such as ‘are there charges if you miss a payment’ or ‘are there extra charges to pay the loan up early.’ It’s really important to read the credit agreement before you sign it, as once it’s signed then you’re agreeing to everything it says. If you don’t understand something, don’t sign it and ask!

Hopefully this will help anyone struggling with some of the jargon that loan companies use. As always please feel free to leave comments below and especially if there are any topics you’d like to see in the future.

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