AER
AER is the Annual Equivalent Rate. It demonstrates what your interest return would be if the interest was paid annually instead of monthly (or any other period).

APR
APR is the Annual Percentage Rate. The APR is a measure of the cost of each credit agreement, taking into account all the charges made under the agreement. It enables you to compare the cost of each deal and work out which is the best value for you. So you can compare one hire purchase agreement with another. However, you should not attempt to compare a mortgage with a credit card deal. Each one provides different terms, so you should not expect to compare the two.

Arrears
Amount overdue as a result of being behind payments.

Asset
Something that has earning potential or value.

Attachment (Scottish Bankruptcy)
Goods can be taken from the garage, garden shed, and driveway.

Attachment of Earnings
This forces the debtor's employer to make deductions from the debtor's earnings and pay them to the creditor.

Bailiffs
Bailiffs are officers of the court, who can in certain circumstances be used by creditors to enforce judgments by collecting debts and repossessing homes or goods.

Bankruptcy
Bankruptcy is legal procedure for dealing with debts when you cannot pay.

Beneficiary
Someone who is identified to receive assets or profits from a trust, an estate, an insurance policy, or any other contract, when the conditions within the contract are met.

Bonds
An official paper given by the government or a company to show that you have lent them money that they will pay back to you at an interest rate that does not change.

Broker
A person or organisation that acts on your behalf when negotiating and selling insurance, mortgage, stocks, property purchases etc.

Budget (Financial Statement)
A Budget is a document listing details of income and expenditure.

Budget Deficit
The amount on your budget by which your expenditure exceeds your income before allowing for offers of payment on non-priority debts.

Budget Surplus
The amount on your budget by which your income exceeds your expenditure before allowing for offers of payments on non-priority debts.

Budgeting
The process of managing outgoings so that they don't exceed income.

Buildings insurance
A type of insurance that contributes towards the cost of repairing or rebuilding the insured building.

Capital
Money that is used to generate income or make an investment.

Capped rate
An interest rate or price which can vary however will have a fixed amount it will not go above. This often applies to products such as mortgages and energy bills.

Charge for Payment (Scottish Bankruptcy)
Full amount outstanding requested to be paid in 14 days.

Charging Order
This secures the debt on your home usually with conditions concerning payments. A charging order has the effect of converting an unsecured debt into a secured one.

Child benefit
A regular (4 weekly) tax-free benefit payment made to anyone who is responsible for a child or young person where they are still in full time non-advanced education or approved training.

Child tax credit
A means-tested allowance for parents and carers of children and young people where they are still in full time non advanced education or approved training.

Company pension
A pension plan where your employer pays a monthly contribution. The amount you pay is tax free.

Contents insurance
A type of insurance that contributes towards the cost of repairing or replacing possessions.

Contractual Payment
Payment agreed in the original contract with the creditor.

County Court Claim
A creditor can make a County Court Claim against you to claim the money you owe them. If court action is taken you will not usually have to go to a court hearing. Most of the procedure is carried out through the post.

County Court Judgment
A County Court Judgment (CCJ) gives details of the court's decision of a creditor's attempt to recover a debt in a civil court.

Credit Rating
A credit scoring system which give points to items of information given on your application form when applying for credit.

Creditor
Someone to whom you owe money.

Critical illness cover
A type of insurance which will provide a lump sum payable upon diagnosis of a specific illness.

Debt
A term used to describe an amount of money borrowed.

Debt Consolidation
This is taking a new loan and using the proceeds to pay off several smaller debts.

Debt Management Plan
This is a repayment scheme administered by NDC for people unable to pay their creditors the full contractual payments.

Debtor
Someone who owes money.

Decreasing term assurance
A type of life assurance which pays out a lump sum if you die within the term, but where the amount insured for reduces in relation to the amount owed during the term.

Decree
A Judgment or order issued by a court in Scotland for non-payment of a debt.

Default Notice
This must be issued by creditors in respect of debts covered by the Consumer Credit Act 1974 before any further action is taken.

Direct Debit
The account holder instructs the bank or building society to comply with requests from a third party to make a series of payments to them.

Discount rate
An interest rate that is reduced for a specified period of time before reverting back to the lender’s standard rate. Often used as a type of mortgage rate, or for energy bills.

Disposable income
The amount of money which an individual has available to spend on non-essential items after priority bills have been paid.

Downshifting
Making major changes to one's lifestyle caused by accepting a reduced level of income.

Endowment
A type of life assurance policy that has an investment element aimed to produce a lump-sum on maturity. Often used as a way to repay a mortgage where only the interest has been repaid to the lender.

Equity
The difference between the market value of your house and the amount outstanding on your mortgage.

Exceptional Attachment (Scottish Bankruptcy)
Goods can be taken from the home, garage, garden shed, and driveway.

Expenditure
Outgoings, costs or money spent.

Family income benefit
An insurance that, in the event of a claim, pays out a regular income for the remaining term of the policy, instead of a "one off" lump sum.

Final salary plans
A pension scheme in which an employee's pension is based on the number of years of service and final salary.

Fixed rate
An interest rate that is fixed for a period of time.

Gross
The total amount before any deductions e.g. Gross salary is the total amount of your salary before tax and National Insurance Contributions are deducted.

Hire Purchase
An agreement where goods are hired for an agreed period, at the end of which the hirer has the option to purchase.

IFA
An Independent Financial Adviser is an individual offering advice on financial products and investments, who is independent from any company providing the financial products.

Income
A term used to describe financial gain, revenue, salary, benefits etc.

Income protection
A type of insurance designed to provide a regular monthly income to replace earnings in the event of being unable to work due to accident or illness.

Income support
An income-related means-tested benefit in the UK for people who are on a low income.

Income tax
A compulsory tax on earnings, pensions and investments.

Increasing term assurance
A type of life assurance which pays out a lump sum if you die within the term, but where the amount insured increases during the term.

Individual Voluntary Arrangement (IVA)
A means of protecting yourself from your creditors by entering into a legally binding agreement supervised by an Insolvency Practitioner.

Inflation
The rate at which prices for goods and services rises.

Inheritance tax
A compulsory tax your beneficiaries pay in the event of your death. The amount payable is dependant on the value of the assets you leave at the time of your death.

Insolvency Practitioner
In the United Kingdom an Insolvency Practitioner is a person specialising in formal Insolvency cases. They are either authorised by the Secretary of State for Trade and Industry or licensed by a recognised professional body.

Insurance
A contract in which one party agrees to compensate another party for any loss or damage caused by risks identified in the terms of the contract.

Interest
A charge for borrowing money or reward for saving money.

Investment fund
A pool of money which is professionally managed to achieve the best possible return for investors.

Irregular Bill
An occasional expense e.g. TV licence, car tax etc

ISA
An Individual Savings Account is a tax free savings account that has a maximum yearly limit on the amount that can be invested.

Joint & Several liability
If two or more parties enter into a credit agreement they will each be liable for repaying the whole amount borrowed.

Joint life second death policies
A type of life assurance that only pays out on the death of the second policy holder.

Key facts document
A compulsory document given by the provider of financial products to clearly show the costs and features of a particular financial product to the client.

Late Fees
Fees added to the amount owed by the debtor when payments are late and where such fees are allowed for in the original contract.

Level term assurance
A type of life assurance which pays out a lump sum if you die within the term. The amount to be paid out remains the same throughout the whole term.

Liability
A term used to identify who is responsible. For example, making repayments on a credit agreement/utility bill/tenancy agreement.

Life cover
A type of insurance which pays out a lump sum in event of the policy holder’s death during the term of the policy.

Maximising Income
Increasing your income.

Money purchase agreement
A form of pension where your final pension depends on stock market performance.

Monthly Expenses
The amount of money needed each month to pay your rent or mortgage, your gas, electricity and water, your food and other living expenses.

Mortgage
A loan to purchase a home where the property is used as security in the event of non-payment of the mortgage.

Non-Priority Debts
Non-Priority Debts are those where the creditor cannot deprive you of liberty, home or essential goods and services.

Official Receiver
An officer of the court who deals with bankruptcies.

Payment holiday
A period of time you can take a break from making repayments on a debt.

Pension
A long term investment plan designed to provide a lump sum and/or monthly income during retirement.

Pension credit
A means-tested benefit available to people aged over 60 on a low income.

Policy
A legal document issued by the insurance company to the policyholder, which states the terms and conditions of the insurance.

PPI
Payment Protection Insurance is a type of insurance sold in conjunction with loans, credit cards or mortgages, and is designed to cover repayments for a set period of time if you are unable to work through accident, illness or unemployment.

Premium
A single or regular payment made to a company in respect of a product.

Priority Debts
Priority debts are those where non-payment gives the creditor the right to deprive you of your liberty, home or essential goods and services.

Private pension
A type of pension that is paid into and arranged by the beneficiary alone and does not include any additional contribution by employers or the government.

Redemption penalty / Early-repayment charge
An amount of money you are required to pay the lender if you repay the full balance outstanding before the term is up.

Repossession
Process by which a creditor with a loan secured on house or goods (e.g. car) can take possession if you do not maintain agreed payments.

Secured Loan
Where the lender has a legal charge on assets (usually a house) giving rights of repossession over that asset if payments on the loan are not maintained.

Shortfall
A shortfall is a debt which is still owed to the lender after the sale of the item it was used to purchase.

Stakeholder pension
A type of personal pension plan set up by the Government. It is offered by commercial companies such as banks, insurance companies and building societies.

Standing Order
This is an instruction signed by an account holder ordering a Bank or Building Society to make regular payments from an account of specified amounts on specified dates.

Term
A period of time for which a policy is issued or repaid.

Term assurance
A type of assurance that pays a lump sum out if you die within a particular timeframe. If no death occurs during the term, then the policy will finish, with no payout made.

Tracker rate
An interest rate that follows the increases and decreases of another interest rate. For example a tracker mortgage may follow the Bank of England base rate.

Unit trust
An investment where a number of individuals place their money with a professional manager who manages the total investment fund on their behalf.

Unsecured Loan
A loan that is not secured on property or goods.

Variable rate
An interest rate which can increase or decrease as determined by the lender.

Warrant of Execution
This is issued by the County Court at the creditor's request allowing the court bailiffs to attempt to take and sell goods and use the proceeds to pay the debt.

Welfare Benefits
State funded allowances paid to those in certain defined circumstances including low income and disability.

Will
A legal document declaring how an individual's assets are to be dealt with in the event of their death.

Working tax credit
A means-tested allowance for working people on a low income, to help with everyday living costs.