Financial Literacy for Everyone
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Borrowing money: terms

Debt means to owe money.

The person who lends you money is called the creditor. Another word for a creditor is a lender.

When you borrow money, you owe the creditor money. You are then in the creditor's debt.

The money that you borrow is called credit.

Types and sources of loans

There are many types of loans and credit available. There are also different types of companies that offer loans. The list below gives some examples:

  • Loans offered by banks:
    - Bank overdraft
    - Revolving credit and
    - Bank loans (this would include student loans and business loans).
  • A Hire Purchase agreement (also known as HP) is a type of loan offered by shops which sell expensive goods. Many furniture stores offer HP loans.
  • Car loans (also called vehicle finance) are offered by banks. The car dealer normally arranges the loan with the bank on your behalf, or helps you to arrange a loan.
  • Home loans (also called mortgage loans or bonds) are offered by banks or companies that specialise in home loans.
  • Retail credit is offered by retail stores like clothing shops or home stores. You normally open an account with such a store.

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