Financial Services Terms

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Base Interest Rate
The rate set by the Bank Of England as being the appropriate benchmark interest rate on which to base other interest rates. It is usually determined by considering the general state of the economy.

Capital
A sum of cash or goods, used to a purpose. When you borrow money, the money you receive is the capital. Eventually, you will repay this capital, plus the interest on it. When you invest in something, the money you put in is the capital. The purpose of doing things with capital is to make it grow.

CCJ (County Court Judgments)
This is the registered debt in a civil action, as defined by a County Court. If you owe money and do not repay it, the creditor may take you to court. The CCJ is the official recognition of the debt, and the action enforced upon you as a result of the judgement.

Commission
A fee charged by a broker or agent for his/her service in facilitating a transaction, such as the purchasing of a pension or mortgage.

Commission sacrifice
A broker or agent may choose to forego some of their commission in order to be able to offer you a cheaper deal.

Creditor
A person or organization, which extends credit to others. Somebody to whom you owe money or goods.

Deposit-based
An investment system which is dependant upon you making regular deposits to build up the capital. Deposit-based systems generally guarantee you will get out at least as much as you put in.

Equity
In the context of a mortgage, equity is the difference between the value of a property and the amount you owe on it. This represents the profit you could potentially realise if you sold the property. The term is also used to describe your ownership interest in a company.

Interest
The return earned on an investment. The amount of extra money an amount of capital can generate. The fee charged by a lender to a borrower for the use of a sum of money, based upon the amount of money (capital) and the time the money is leant for.

Offering to treat
If you owe money and cannot pay it back at the rate dictated in the contract, you may offer to repay the money at a lower rate.

PEP
Personal Equity Plan. These can no longer be started, but you can continue to hold one you have already opened. You cannot put any new funds into an existing PEP

Premium
A regular, usually annual, payment towards an insurance policy.

Security
Property which is pledged as collateral of a loan. If you borrow money secured against a property, the creditor may get back the money from the sale of your property if you default on your loan.

Stock Market
Refers to the organized trading of stocks through exchanges and over-the-counter.

Stockbroker
An agent who deals mainly with the purchase and sale of stocks and shares on your behalf.

Term
The period over which an amount of money is lent. For instance, the Mortgage Term is the length of time you expect to pay back your mortgage in.

Term Insurance
This is a special kind of insurance that is for a specified period of time and that pays a benefit only on the death of the policy holder during the term of the policy. The policy expires without value when the term has expired.

TESSA
Tax Exempt Special Savings Account. Although you can no longer start a new TESSA, you can continue to hold and invest in an existing one until it eventually matures.

Trust
Legal arrangement wherein an individual places financial control over property or investments to a person or institution for the benefit of the owners or investors. The trustees themselves are generally the beneficiaries.