PERSONAL LOANS  Accrued Interest Interest that accumulates on a loan and has be to paid back at a later time, usually when the principal is due, rather than being paid during the life of the loan. Accrued interest may be compounded, where the interest is paid on interest, or simple interest.

Adjustment interval The regularity with which the interest rate on a loan can be changed.

Amortisation The process of paying back a loan in installments. During the first few years, the bulk of the installment goes towards paying off the interest owed.

Balloon Payment Usually a short-term fixed-rate loan, which involves small payments for a period and one large payment at a specified time to settle the outstanding principal.

Basis Point One one-hundredth of a percent (.01%). Changes in interest rates are often quoted in basis points.

Borrower A person that obtains funds from a lender for a period of time and pays an interest rate for the money.

Collateral An asset or assets offered as security for a loan in the event that there is a default. Banks do not always require collateral for all loans.

Default Failure to make payments on time. Default can lead to foreclosure.

Deferred Interest The delay of interest payments while a borrower is unemployed or has income problems.

Discretionary Income Income left to a person or family after all other fixed financial obligations have been met.

Fixed Interest A rate of interest that is set at the time a loan is negotiated and remains constant during the life of the loan.

Interest Rate The charge - expressed as a percentage - for making use of credit facilities. A 17% annual interest charge means that an amount equal to 17% of the amount borrowed will be charged each year by the lender as a lending fee.

Lender Institution that lends out money on the condition that it will be paid back with interest.

Overdraft A short-term loan agreement with a bank to cover unexpected expenses. The lender is charged a premium interest rate for the facility.

Prime rate Fluctuating interest rate banks charge to their best customers.

Principal Amount of debt, excluding interest obligations, left on a loan.

Repayment Schedule A plan that sets out the amount due in each payment period, the number of payments required to pay back the loan in full, and the due date of each payment.

Repossession The action of retrieving the assets of a borrower after the non-payment of agreed installments.

Simple Interest Interest calculated only on the original amount of the loan.

Variable Interest The rate of interest that changes on a regular basis during the life of a loan and is generally tied to the Reserve Bank's repo rate.