Personal Loans Glossary Of Terms
Please note that these are a general explanation of the meaning of terms used in relation to personal loans.
The wording of loan terms and conditions may use different phrases or terms, and you should read the terms and conditions of the relevant loan to understand the features and cost of that loan. You cannot rely on these terms to the part of any loan you may purchase.
Refer to the product disclosure statement (PDS) and Canstar’s Financial Services and Credit Guide (FSCG).
What is an Account-keeping fee or ongoing fee?
Account-keeping fee or ongoing fee is a monthly account-keeping fee that is charged by the lender to help cover the administration cost of maintaining the line of credit. Alternatively, you may be charged an annual fee rather than an ongoing account-keeping fee.
What is an Advertised rate?
An Advertised rate is the interest rate advertised by institutions, not including fees, discounts, and special offers.
What is Bankruptcy?
Bankruptcy is when someone’s debt problems become so serious that they are unable to pay their existing debts and bills. When this happens, they can apply to a court to be declared bankrupt, and any assets or savings they have can be used to pay off their debts. Normally after one year a person will be discharged from bankruptcy, but it will still have a negative impact on their credit rating and may stop them getting credit in the future.
What is a Cash advance?
A Cash advance is when you withdraw cash from a line of credit such as a personal loan. Usually incurs additional fees or a higher interest rate.
What is a Comparison rate?
A Comparison rate is a rate that represents the total annual cost of the loan in a single figure, including the interest rate, payments, and most of the ongoing and upfront fees and charges. On the Canstar website, all comparison rates for personal loans are based on a $10,000 loan over 3 years.
What is Consumption loan debt?
Consumption loan debt is debt for personal loans for things that are either fully used immediately or depreciate in value from the time they are bought, including holidays, hire purchase, cosmetic surgery, furniture, furnishings, and other goods and services.
What is a Credit report or credit history?
A Credit report or credit history is a report from a credit reporting agency that contains a history of your previous loan and bill payments. Banks, lenders, creditors and financial institutions use this report to determine how likely you are to repay a future debt and whether or not they should lend money to you. Find out what is included in your credit report here.
What is a Credit score or credit rating?
A Credit score or credit rating is a numerical score that represents the credit-worthiness of an individual or corporation, based on their previous borrowing and repayment history. Find out how to check your credit score here.
What is Debt consolidation or a consolidation loan?
Debt consolidation or a consolidation loan is when you take out one loan to pay off multiple other debts (e.g. other loans or credit cards). This is often done to secure a lower interest rate, secure a fixed interest rate, or for the convenience of paying only one monthly repayment instead of monthly repayments on multiple loans and credit cards. Learn how to consolidate debt here.
What does it mean to Default?
Defaulting is when a cardholder fails to fulfil their obligation to make the minimum required payment on their loan. Defaults are a serious black mark on your credit report and negatively affect your credit rating.
What is a Drawdown?
A drawdown is when a lender “draws down” the loan from their funds into your bank account, and you use the money. Interest typically starts being charged from the date your loan funds are drawn down into your bank account.
What is a Fixed interest rate?
A fixed interest rate remains the same for the entire duration of the loan.
What is a Loan term?
A Loan term is the term of the loan usually refers to the length of time the borrower has to repay the loan. This is different to the loan terms and conditions, which are a full list of the lender’s conditions in agreeing to offer a loan, including the interest rate, fees and charges, and the loan term.
What is a Redraw?
A Redraw is a loan feature where the borrower can withdraw funds they’ve already paid, if they have made additional repayments on top of the required minimum repayments. The redraw feature is not available on all loans.
What is a Secured loan?
A Secured loan is a loan that is backed by ‘security’ (collateral) such as the property the business owns (commercially secured) or the home the business owner lives in (residentially secured).
What is a Unsecured loan?
An Unsecured loan is a loan that is obtained without security (collateral).
What is a Variable interest rate?
A variable interest rate is a rate that fluctuates over time based on the RBA cash rate and the lender’s business decisions.
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