Topic 3 Key terms

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Affordability
An important concept in helping people to choose financial
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Bank rate
The interest rate that the Bank of England uses when it lends
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Buy-to-let mortgage
A long-term secured loan taken out by a person who is buying a property with the intention of letting it to tenants.
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Capital
In relation to mortgages, ‘capital’ refers to the total amount borrowed.
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Capital gains tax
tax A tax payable on the gain (profit) made when you sell or give away
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Consumer credit
This is another term used for borrowing. It is important to
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Consumer durable
A useful product with an expected long life (eg TV, car).
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Credit card
A card that allows the holder to make purchases face to face,
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Creditworthiness
The extent to which an individual is seen as being likely to pay back any money they borrow.
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Default
To fail to repay borrowing when the repayment is due.
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Discount mortgage
A variable-rate mortgage that gives the customer a set discount off the provider’s standard variable rate (SVR) for an agreed
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Endowment policy
An insurance product that pays out a lump sum after a specified term or if the insured person dies before the end of the term. Endowment policies are often used as a way of saving over the long term.
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Equity This has two meanings
: a) when talking about investments, an
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Fixed-rate mortgage
A mortgage loan whereby the interest rate is fixed for a stated
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Hire purchase
A type of secured consumer credit to finance items such as cars
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Ijara home purchase
A form of Islamic home purchase plan. The provider buys the
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Inflation
A general rise in prices, which means that the purchasing power of money falls.
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Interest rate
The amount, expressed as percentage, that a financial services provider charges a borrower when it lends money, or pays to a saver.
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Interest-only mortgage
A mortgage loan whereby the monthly repayment covers only the
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Islamic home finance
Methods of buying a home that are compliant with Sharia law, which forbids Muslims from paying or receiving interest. There are two main types: Ijara and Murabaha home purchase plans (see
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Loan forbearance
When a lender does not seek to repossess a property as soon as the borrower misses a few monthly payments, instead allowing the customer to stop paying or make reduced payments for a set period.
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Loan to income (LTI)
The ratio of the size of the loan to the income of the customer. It
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Loan to value (LTV)
The ratio of the size of the loan to the value of the property.
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Maintenance loan
A loan granted to a full-time student by the not-for-profit Student
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Loyalty mortgage
A mortgage loan with specific discounts or incentives for a
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Mis-selling
When an individual or provider is negligent or reckless in selling a
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Mortgage
A loan taken out to pay for a property, usually over a long term such as 25 years.
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Negative equity
The situation where a mortgage loan is bigger than the value of the property.
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Office of Fair Trading
The government department that monitored how businesses
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Overdraft
A facility that allows an account holder to withdraw more money than they actually have in their account.
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PAYE
the term used to describe the deduction of
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Payment protection
An insurance product intended to ensure repayment of loans
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Personal loan
A product that allows someone to borrow a fixed amount over a fixed period at a fixed amount of interest.
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Premium Bond
A lottery bond, issued by NS&I, entered into a monthly prize draw
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Repossession
A legal process whereby a financial institution (eg a mortgage
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Stamp duty
The term generally used to refer to stamp duty land tax (SDLT), a tax payable on purchases of land and property above a certain value.
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Standard variable rate
A provider’s basic mortgage rate, which the provider can decide to change at any time – often such changes follow a change in the Bank of England’s Bank rate.
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Tracker
A common form of variable-rate mortgage whereby the interest rate charged ‘tracks’ changes in some other specific interest rate.
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Tuition fee loan
A loan granted to a student by the not-for-profit Student Loans Company to enable them to pay the tuition fees of their course.
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Variable-rate mortgage
A mortgage loan whereby the borrower pays whatever the provider’s basic mortgage rate is at the time. This is usually known as the standard variable rate (SVR
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Other cards in this set

Card 2

Front

Bank rate

Back

The interest rate that the Bank of England uses when it lends

Card 3

Front

Buy-to-let mortgage

Back

Preview of the front of card 3

Card 4

Front

Capital

Back

Preview of the front of card 4

Card 5

Front

Capital gains tax

Back

Preview of the front of card 5
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