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Glossary

APR or Annual Percentage Rate is a summary figure for comparing debt costs which
brings together interest rates and other charges.
Assets

Everything that a person owns that has a monetary value (e.g. property, investments or
cash).
Compounding
The process by which interest repayments are added to the original amount borrowed
to give a higher total figure which, in turn, attracts interest rate charges.
Credit
An arrangement to receive cash, goods or services now and to pay for them in the
future.
Cyclical
A recurring pattern of a variable over time showing peaks and low points at regular
intervals.
Equity

Equity in a property is the excess of the market value of the property over the
outstanding mortgage debt secured against it.
Equity withdrawal
The process whereby mortgage levels are increased to release funds for additional
spending.
Interest
The charge a borrower pays for the use of someone else’s money.
Interest rate

The exact price that a borrower pays for debt, normally expressed as an annual
percentage.
Liability
An amount of money owed at a particular point in time.
Mortgage

A loan secured on property or land.
Net worth/net wealth
The value of all assets minus all liabilities.
Overdraft
A facility provided by banks and some building societies which allows customers to go
into debt on their current account.
Principal sum (or capital sum)
The original amount of debt taken out.
Secured debt
Debt secured against an asset such as a home. If the debtor fails to make adequate
repayments, the lender has a right to obtain money by selling the asset.
Term
The period of time over which a debt is to be repaid.
Unsecured debt

Debt not backed by any asset.

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