Loan terms explained

APR is a standardised measure of the yearly cost of credit, expressed as a percentage. It combines the interest rate with the compulsory fees a lender charges to set the loan up, which is what separates it from the interest rate alone. Two loans quoting the same interest rate can carry different APRs if one of them charges an arrangement fee.

APR is the figure to compare between offers. Comparing interest rates alone hides fees.

A representative APR is the advertised rate that a lender expects to give to a defined share of successful applicants, conventionally at least 51%. It is a marketing figure rather than an offer. Up to 49% of approved applicants can be charged more than the representative rate.

Your quoted rate is the only one that binds. Treat an advertised representative APR as an indication.

An interest rate is the charge a lender applies to the outstanding balance, expressed as a percentage per year. It excludes fees. A fixed rate stays the same for an agreed period; a variable rate moves, usually tracking a reference rate, so the repayment can rise or fall during the term.

Fixed gives certainty and usually costs slightly more. Variable can be cheaper and can also move against you.

The total amount repayable is the sum of the capital borrowed plus all interest and fees over the full term. It is the single figure that shows what the credit costs in cash. A longer term lowers the monthly payment and raises this number.

Ask for it in writing. A comfortable monthly figure can conceal a considerably more expensive loan.

Short-term and same-day loans

The term is the agreed period over which a loan is repaid, quoted in months or years. It determines the size of each repayment and the total interest paid. Shortening the term raises the monthly payment and lowers the total cost; extending it does the reverse.

Early settlement is repaying a loan in full before the end of its agreed term. Some agreements apply a settlement charge that offsets part of the interest saved. The saving therefore depends on the settlement figure the lender provides, not on the remaining balance.

Request the settlement figure in writing before deciding. On short-term borrowing this clause often decides whether repaying early is worth doing.

A soft credit check is a review of your credit file that is recorded but not shown to other lenders. It has no effect on your credit score. Comparison and eligibility checks normally use one.

Comparing with a soft search costs you nothing on your file. That is why comparison happens before application.

A hard credit check is a full review of your credit file, recorded and visible to other lenders for a set period. It is run when you make a formal application. Several hard searches in quick succession read as repeated declines and reduce your chances with the next lender.

Compare first, then apply once to the lender most likely to approve you.

Bad credit loans

An affordability assessment is a lender's calculation of whether you can sustain the repayments from your income after existing commitments. It considers outgoings and dependants, not just earnings. A high income with heavy commitments can fail an assessment that a lower income passes.

A default is a lender's formal record that an account was not paid as agreed and the agreement has broken down. It is registered on your credit file and remains there for six years from the date it was recorded. A settled default is treated more favourably than one still outstanding.

Recency matters more than presence. A settled default from four years ago reads very differently from an active one.

Borrowing with adverse credit

A CCJ is a court order confirming a debt is owed following a creditor's claim. It is recorded on the credit file and, like a default, drops off after six years. Specialist lenders assess the age of a CCJ and whether it has been satisfied.

A guarantor is a third party who contractually agrees to repay a loan if the borrower does not. Their own income and credit file are assessed alongside the borrower's. The liability is real: a guarantor can be pursued for the full outstanding balance.

A guarantor can open options a damaged file cannot reach on its own. It is a serious commitment to ask of someone.

An unsecured loan is borrowing that is not tied to an asset. The lender relies on your income and credit history alone. Rates are typically higher than secured borrowing because the lender has no asset to recover against.

Personal loans

A secured loan is borrowing tied to an asset, most often property, which the lender can recover if the debt is not repaid. The security reduces the lender's risk, which usually lowers the rate. It also places the asset at risk if repayments are missed.

A lower rate against your home is not automatically the better choice. Weigh the rate saving against what is being pledged.

Debt consolidation

LTV is the size of a loan expressed as a percentage of the value of the property securing it. A larger deposit produces a lower LTV. Lenders price in bands, so crossing below a band boundary can materially change the rate offered.

A bridging loan is short-term borrowing secured on property, used when timing rather than affordability is the obstacle. It is priced monthly rather than annually and is repaid from an identified exit, usually a sale or a refinance. It is expensive to hold and is not intended to run long.

A lender will want the exit evidenced before it lends, not described.

Bridging loans

A remortgage is the replacement of an existing mortgage with a new one, either with the same lender or a different one. It is used to secure a better rate or to release equity. It is a new application and is assessed as one.

Remortgage

Equity release is a way of converting property value into cash without moving, available to older homeowners. The debt is normally repaid from the sale of the property on death or on moving into long-term care. Interest usually compounds over the life of the arrangement, so the sum owed grows.

It reduces what passes to your estate. Independent advice is essential before proceeding.

Equity release

Residential status is the category assigned under the Control of Housing and Work (Jersey) Law 2012 that governs which property a person may buy, sell or lease in Jersey. There are five categories, not four. Entitled follows ten years of residence and carries no property restriction; Entitled for work follows five consecutive years and permits purchase only jointly with an Entitled or Licensed spouse or partner; Licensed is excluded from first-time-buyer restricted and social rented housing; Registered may lease Registered property only.

This is settled before affordability. A lender establishes your status before it looks at your income.

Property purchase loans gov.je — residential status

Flying freehold is a Jersey form of co-ownership in which a building is divided into units that share common areas and services, and the owners form an incorporated association bound by a declaration of co-ownership. The owner holds a flying freehold interest in the property itself. A lender secures against it by a legal charge, or hypothec, registered in the Public Registry.

Share transfer is a Jersey form of ownership in which the buyer purchases shares in a company that owns the building, and those shares confer a right to occupy a specific unit. The buyer does not own the property itself. A lender secures against the shares through a security interest agreement registered in the Security Interests Register at the Jersey Financial Services Commission.

Not every lender lends on share transfer, and the ones that do treat it differently from freehold. Establish this before making an offer.

A hypothec is the charge a lender registers over Jersey immovable property as security for a loan. It is recorded in the Public Registry. It is the Jersey equivalent of a mortgage charge in the UK sense.

Stamp Duty is the duty payable on the purchase of freehold property in Jersey under the Stamp Duties and Fees (Jersey) Law 1998. Land Transaction Tax is the equivalent charge on share transfer purchases, introduced so that the two routes carry the same cost. A share transfer buyer pays no Stamp Duty and self-assesses LTT instead.

Which one applies depends on how the property is owned, not on its price.

gov.je — land transaction tax

CIFO is the statutory ombudsman for financial services provided in or from Jersey, Guernsey, Alderney and Sark, established by the Financial Services Ombudsman (Jersey) Law 2014 and its Guernsey equivalent. It handles complaints about credit, including lenders and credit brokers, and can make binding awards of up to £150,000. It is separate from the UK Financial Ombudsman Service.

A complaint must reach CIFO within six months of the provider's final response. For Jersey, the event complained of must have occurred on or after 1 January 2010.

gov.je — financial services ombudsman

Vehicle Emissions Duty is the duty payable when a vehicle is first registered in Jersey. It is calculated from the manufacturer's CO2 emissions figure, or from cubic capacity for vehicles built before March 2001, where CO2 data generally does not exist. Approved motor traders may have it suspended for up to twelve months while a vehicle is stock in trade.

It falls due on first registration, not on a change of finance agreement, so refinancing an already-registered vehicle does not trigger it again.

Used car finance gov.je — vehicle emissions duty

A lender is the party that provides the money and holds the credit agreement. It carries out the affordability assessment and sets the rate. Your agreement is with the lender, not with anyone who introduced you to it.

A broker arranges a credit agreement between a borrower and a lender, and advises on which product to take. A broker may charge a fee, take a commission from the lender, or both. Ask which applies before you engage one.

An introducer passes an enquiry to regulated lenders and brokers and does not itself lend or advise. Best Loans Jersey operates as an introducer. We are not regulated by the Jersey Financial Services Commission, and nothing on this site constitutes financial advice.

This is the role we occupy. It is why we will tell you when nothing on our panel fits, rather than placing you badly.

Whole of market describes a search across the lenders available in a market rather than a single provider or a restricted panel. It does not guarantee that every lender in existence is included. Ask which lenders a search actually covers.