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Personal Loan Glossary

Accrued Interest
This is the accumulated interest you have to pay. It may be fixed or increasing over time.
Annual Fees
Annual fees are what banks charge on an annual basis for their maintenance.
Debt Consolidation
A balance transfer loan allows you to transfer all your outstanding debt from credit cards and other personal loans into one account. It usually charges a lower interest rate or has a grace period for 6 to 12 months.
This refers to the person taking out a loan from a bank, financial institution or moneylender. If you take out a personal loan, you are the borrower.
Cancellation Fees
When you want to cancel your account before the agreed date with the lender, you'll have to pay a cancellation fee.
With secured loans, you have to put up assets before your loan can be approved. In the event that you cannot pay off your debt, the bank will seize these assets. This is called a collateral.
Conversion is the act of transferring your debt to another account within the same bank.
Credit Limit
Usually applicable only to credit lines, this is the agreed amount that the lender can borrow from the bank.
Credit Rating
Your credit rating is the score you get as a measure to see how reliable you are as a borrower. This score is accessible by banks in your credit report, and plays a huge part in approval for a loan.
A default is when you fail to make repayments on your loan for a few months. When you default on your loan, the bank might repossess what you have put up as collateral.
Early Redemption Charge
With term loans such as personal instalments where you have a fixed monthly repayment, you will be charged an early redemption fee if you pay off your debts before the loan tenor ends.
Effective Interest Rate
The effective interest rate (sometimes called EIR) is what you should look out for when comparing loans. This is because the EIR takes into consideration the compounding interest, processing and handling fees, which comes up to what you actually pay on your loan.
Fixed Rate Loan
This is a type of loan that charges an interest rate that doesn't fluctuate throughout the loan tenor.
Grace Period
Also known as an interest-free period, this is an allocated time period where you pay 0% on your interest. Balance transfer loans are known for their grace periods, which can go up to 12 months.
Late Payment Fees
When you miss a payment date, the lender will charge you a late payment fee.
This refers to the bank, financial institution or moneylender advancing a loan.
Loan Tenor
A loan tenor, or a loan term, is the length of time you agree to pay the loan. It can range from months to years.
Monthly Repayments
A monthly repayment is the sum you are required to pay the lender each month. This usually includes the interest as well.
Secured Loan
A secured loan requires a collateral before it can get approved. Because of this, secured loans usually offer lower interest rates compared to unsecured loans.
Term Loan
With a term loan, you have to make fixed monthly payments over the agreed loan tenor. This is the opposite of a revolving loan.
Total Amount Payable
When you add the interest rates, processing and handling fees on top of the amount borrowed over the loan tenor, you get the total amount payable.
Unsecured Loan
This refers to the type of loan that doesn't require collateral. Some unsecured loans are personal loan and credit cards.

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