Glossary
Core borrowing terms used across LoanCalc Lab — plain English, UK £ EXAMPLES, and links into the matching calculator and guide.
Last checked
This glossary explains the words LoanCalc Lab uses on calculators and guides: EMI, APR, amortisation, snowball, avalanche and consolidation. Each term page is a short UK-first explainer with a labelled EXAMPLE, common mistakes, and links to the tool that computes the idea and the guide that narrates it.
Definitions here are educational. They are not statutory definitions for every product type, not personalised advice, and not a credit offer. LoanCalc Lab is published by Rodway Labs and is not a lender or broker.
Use the glossary when a word in a quote, a lender letter or one of our calculators stops you following the numbers. Find the term in its theme below, read the one-line version, and only open the full page if you need the worked EXAMPLE. If two words seem to mean the same thing, check the “terms people often confuse” section — the difference is usually where the cost hides.
How to use these terms with the tools
- Skim the short definition on this index, then open the term page if you need the worked EXAMPLE and mistakes list.
- Jump to the linked calculator when you have numbers (amount, rate, term, fees, or several balances) and want outputs under stated assumptions.
- Read the matching guide when you want the how-and-why in prose — guides explain; calculators compute; glossary pages define.
- Keep EXAMPLE figures labelled EXAMPLE. Replace them with figures from your own lender illustration when you are checking a real offer — see using calculators with a lender illustration.
Suggested path for common questions
- “What will I pay each month?” — start with EMI, then the personal loan / EMI calculator.
- “Why is early interest so high?” — amortisation.
- “Does the fee change the deal?” — APR and the APR / true cost calculator.
- “Which debt first?” — snowball vs avalanche.
- “Should I roll debts into one loan?” — consolidation and the break-even calculator.
Terms by theme
The nine term pages are grouped by the question they help with. The first line is a plain-English version; the second is the fuller definition used on the term page.
Repayments and schedules
Words for what you pay each month and how the balance falls over time.
- EMI (Equated Monthly Instalment)
- In plain English: The same amount you pay every month, covering interest and some of the loan.
- A fixed monthly payment on a reducing-balance loan that covers both interest and principal. Common terminology in India and parts of South-East Asia; equivalent to a standard amortising instalment elsewhere.
- Full term page →
- Amortisation
- In plain English: How a loan is paid down bit by bit, with more interest early on and more principal later.
- The process of paying off a loan over time through regular payments that gradually reduce the outstanding principal. An amortisation schedule shows the interest/principal split each month.
- Full term page →
- Total amount payable
- In plain English: Everything you will hand over by the end: the loan, all the interest and any fees.
- Everything you will repay over the life of a loan: the amount borrowed plus all interest and fees. It appears in UK representative examples.
- Full term page →
The cost of borrowing
Words that help you compare one offer with another on a fair basis.
- APR (Annual Percentage Rate)
- In plain English: One yearly percentage that includes interest and compulsory fees, for comparing loans.
- A standardised way of expressing the yearly cost of credit. Headline interest rates may exclude fees; a true-cost view folds fees into an effective rate for comparison.
- Full term page →
- Arrangement fee
- In plain English: A one-off charge for setting the loan up, which makes it dearer than its rate suggests.
- A one-off charge for setting up a loan, often deducted from the money you receive or added to the balance. It raises the true cost above the headline rate.
- Full term page →
Paying off early
The figure that matters when you want to clear a loan before its end date.
- Settlement figure
- In plain English: The exact amount the lender says will close the loan if paid by a given date.
- The amount a lender says will clear a loan in full if paid by a stated date — remaining balance plus interest to that date, less any rebate, plus any allowed compensation.
- Full term page →
Handling several debts
Strategies for clearing more than one card or loan.
- Debt snowball
- In plain English: Clear the smallest debt first, then roll that payment on to the next.
- A payoff strategy that clears the smallest balance first while making minimum payments on other debts, then rolls freed payments into the next smallest balance.
- Full term page →
- Debt avalanche
- In plain English: Clear the debt with the highest rate first, which usually saves the most interest.
- A payoff strategy that targets the highest interest rate first to minimise total interest, while making minimum payments on other debts.
- Full term page →
- Debt consolidation
- In plain English: Swap several debts for one new loan — only worth it if the total cost falls.
- Replacing multiple debts with a single loan — often to simplify payments or reduce rate. Fees and a longer term can erase the benefit; always check break-even.
- Full term page →
Terms people often confuse
These pairs sound alike but answer different questions. Mixing them up is one of the most common reasons a loan turns out dearer than expected.
- APR vs interest rate
- The interest rate is what is charged on the balance. The APR also folds in compulsory fees, such as an arrangement fee, and is worked out under FCA rules. Two loans at the same rate can have different APRs; compare APRs, then check the total amount payable.
- Representative APR vs your personal APR
- A representative APR is the rate in an advert, which at least 51% of successful applicants must be offered. Your personal APR is the one in your own quote and can be higher. Use the personal figure in any calculator — see representative APR explained.
- Soft search vs hard search
- A soft search, used by eligibility checkers, is visible only to you and does not affect lenders’ decisions. A hard search is recorded when you apply and other lenders can see it. The soft vs hard search guide covers when each happens.
- Outstanding balance vs settlement figure
- The balance on a schedule is what is left of the original borrowing. A settlement figure is the lender’s written amount to close the loan on a given date, including interest to that date, less any rebate, plus any allowed compensation. Only the second clears the loan.
- Monthly payment vs total amount payable
- A lower monthly payment often comes from a longer term, which raises the total amount payable. Check both before deciding a loan is cheaper.
- Snowball vs avalanche
- Both clear several debts one at a time. Snowball targets the smallest balance first for quicker wins; avalanche targets the highest rate first and usually costs less interest.
- Consolidation vs refinancing
- Consolidation replaces several debts with one new loan. Refinancing replaces one existing loan with another, usually at a lower rate — see refinance when it pays. Both can cost more overall once fees and a longer term are counted.
Related ideas explained in guides
A few words used on the site do not have their own term page yet, because a guide explains them better in context:
- Reducing balance — interest charged only on what you still owe, so it falls each month. See how EMI works.
- Break-even month — the month a fee has been repaid by lower payments. See refinance when it pays.
- Secured loan — borrowing tied to an asset, usually your home, which can be at risk if you fall behind. See secured vs unsecured.
- Overpayment — paying more than the contractual amount to clear a loan sooner. See overpaying vs saving.
Next steps
Browse the calculators hub or the guides hub. For general UK credit information see MoneyHelper and the FCA consumer credit pages. Last checked 24 October 2026.