Deciphering the fine print: A guide to understanding T&Cs

When choosing such important products you don’t want to have to google every second word just to understand what you’re getting. That’s why we’ve created a dictionary of some common terms you might find sprinkled throughout the T&Cs. 

This is the process of determining the value of an asset. An appraiser comes in, gives your asset (whether it's real estate, a business, some jewelry or artwork) an evaluation, and comes up with their professional opinion of its current value. This independent evaluation is meant to be objective and impartial, so you get a fair and accurate estimate that both buyer and seller can count on during negotiations. 

After the appraiser valued his "priceless" Beanie Baby collection at $20, Brad knew his dreams of early retirement funded by vintage stuffed animals weren't quite as sound as he imagined.

Think of this as the yearly cost of borrowing money or what you'll earn on an investment. When you take out a loan, the APR tells you how much extra you'll actually end up paying each year - it's not just the interest rate, but also includes any fees and charges the lender may take. 

When reviewing the loan offers from several lenders, Sara compared the APRs to find the one with the lowest overall annual cost, rather than just looking at the interest rates.

A person or party that is designated to inherit funds, property, or benefits from a will, trust, insurance policy, or other financial arrangement. For example, in a life insurance policy, the beneficiary is the person who will receive the proceeds of the policy upon the death of the insured.

Paula was stunned when she received the call to tell her she was the beneficiary of her great-uncle’s life insurance policy.

When you earn interest not only on money you originally invested or deposited, but also on the interest itself

The money Joan invested in my retirement account when she was young has now grown to a sizable nest egg thanks to many years of compound interest.

A person who is equally responsible for repaying the debt if you can't pay. 

David was so grateful his sister agreed to co-sign his auto loan so he could qualify for a rate he could afford. 

The maximum amount of credit you are allowed to use. Consequences of going over your credit limit could include your card being declined,  incurring a late fee and having a negative impact on your credit rating which could affect future credit applications. 

Brian just got a credit limit increase but he’s being careful not to go on a shopping spree that maxes out his card.

An agreed amount you will pay for an insurance claim before coverage kicks in. 

Since Jack had a $500 deductible on his car insurance, when another motorist damaged his vehicle, he knew he would have to pay for the first $500 of repairs.

When you ask to borrow money you agree to repay it on time every month. But if you miss payments or stop paying altogether, you've defaulted and broken the agreement. When this happens, it can make it harder to borrow money in the future.

After seeing the price of the concert tickets, Amy joked that going into default was a small price to pay for seeing her favorite band live in action, before deciding it wasn’t a smart move.

Authorization you give to companies allowing them to withdraw funds directly from your bank account on a recurring basis. This can be a convenient way to pay your regular bills like utilities, subscriptions, or memberships without having to manually make payments each month. You're in control, and you can always tell your bank to stop if you change your mind. 

After forgetting about the active direct debits for her bills, Diane knew she needed to find an app to keep track of her spending.

A financial agreement where an asset or money is held by a third party on behalf of two or more parties involved in a transaction. This escrow agent acts as an impartial referee until the terms are met.

The buyer and seller agreed to use an escrow company to hold the earnest money deposit until the real estate transaction was complete.

Temporary postponement of loan payments, typically for a mortgage or student loan as agreed with a lender.

Nina was so relieved she qualified for forbearance on her loan while she was out of work - it was one less bill to stress over that month.

An agreed period of time after a payment due date during which you can still pay without a penalty (such as late fees) or a negative impact on credit rating. 

She was so busy this month that paying my credit card bill slipped her mind, but thankfully the grace period saved her. 

When borrowing money, this is the extra amount you pay on top of the amount borrowed. In the context of a savings account, interest is the amount you will earn.  So, whether you're borrowing or saving, the interest rate tells you how much extra you'll either have to pay or will receive as a percentage.

Bill was about to apply for the loan when he noticed the interest rate, he almost fell out of his chair before closing the tab. 

A legal right that allows a person or organization to keep possession of someone else's property until a debt is fully paid. It's like a form of security that ensures they will be paid what they are owed. For example, banks can put liens on homes when mortgage payments are missed.

After defaulting on his boat loan, Steve was furious to find the bank had put a lien on his beloved yacht until he paid what he owed.

The date on which the final payment of a loan is due and the entire debt needs to be completely paid off.

Charlie’s auto loan maturity date snuck up so fast - he couldn’t believe 5 years had passed and final payment was already due!

The smallest amount you need to pay on a credit card or loan each month by the due date to avoid any penalties or negative impact on your credit score. 

Lewis knew paying only the minimum due would drag out his credit card balance for years so he tried to pay as much as he could each month to clear it faster. 

A charge associated with setting up a loan, such as a mortgage or an account. 

Greg hadn’t budgeted for the $500 origination fee included in his new mortgage loan - next time he would ask beforehand if they charged one.

When you spend more than you have in your account and the bank allows the transaction to go through for a short time (and for a fee).

Frank didn't realize that huge online purchase would overdraw my account - now he owes the bank a $35 fee on top of paying back the overspent amount.

A fee you may be required to pay as a result of paying off some or all of your mortgage before the agreed-upon term. How this is calculated will differ but could include a percentage of the remaining amount or certain number of months' worth of interest.

Mark didn't realize this mortgage had a prepayment penalty - so much for his plan to pay it off 5 years early…

A summary of all the activity on your account within a certain period of time, usually covering what has gone in and out of your account and any fees or interest.

To apply for a mortgage Rita had to send the last three months bank statements for all her accounts.

An assessment to determine how high risk you are (for example to lend to or to insure). This involves an evaluation of factors such as age, job, and health to determine the risk involved to the company.

The underwriting process for her new life insurance policy involved multiple medical evaluations and answering extensive health history questions. 

In a world where fine print can make or break your financial decisions, being well-informed is more than just a convenience���it's a necessity. Before you sign on the dotted line or click "agree" on those terms and conditions, take a moment to empower yourself with knowledge. And remember, Trustpilot is here not only to demystify the jargon but also to help you choose the financial products and services that best fit your needs. So, before making your next big financial decision, check Trustpilot.

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