How English Learning Empowers Better Money Management
If you are not 100% familiar with or fluent in English, it can be difficult to navigate the various systems in the UK. This is especially the case with the financial system as there are several language barriers, particularly around financial jargon.
The good news is, English as a language is relatively easy to get a basic understanding of and if you embark on an English learning journey it will help your money management tremendously. Financial institutions also actively look to help everyone, regardless of their native language, and have processes to make your life easier.
Let’s explore how English learning empowers better money management.
Barriers to Entry – The UK Financial System
The primary barrier to entry into the UK financial system is language. All financial institutions operating in the UK use English as their primary language, and in most cases, will only use English.
There are specialist lenders that cater to minority groups which may allow you to communicate in your native language. However, all documentation relating to the financial products you acquire from these lenders must be supplied in English.
This means you may find it difficult to understand the contract, terms, and conditions if you are not an adequate English speaker.
The reason all documentation needs to be in English is so the Financial Conduct Authority (FCA) can access the information and ensure the products meet their regulations.
Don’t be too put off though; even native English speakers can struggle to understand financial contracts and they are often filled with jargon.
To aid your basic understanding of financial contracts, we have compiled a short list of common jargon terms and a clear explanation of what they mean. This list is not exhaustive by any means, however, if you are applying for finance, this will give you a good chance of understanding what the financial institution is discussing with you.
Annual Percentage Rate (APR) – This is the Annual Percentage Rate and will be the amount of interest charged per year.
Assets – Assets are any property you own, for example, a car or a house.
Caveat – In a contract, a Caveat is a warning. If you see the term Caveat Emptor, it means you are personally responsible for your buying decision – commonly known as ‘Buyer Beware’.
Early Repayment Charge (ERC) – If you repay a debt early, some lenders will apply a fee (penalty). This fee is known as an Early Repayment Charge.
Equity – If you take secured finance such as a mortgage as you make payments, you will own more of the property. This percentage of ownership is called Equity.
Indexation – Sometimes financial contracts mention indexation, this is where the lender increases the amount you pay according to inflation.
Interest – Interest is best thought of as the fee you pay to borrow money. Most fees are calculated as a percentage of the total borrowed. For example, you may find a loan with a 10% interest rate which means you will pay back the amount borrowed, plus 10%.
Personal Guarantee – Some finance agreements require personal guarantees. These are normally an asset put down to protect the lender if you can’t repay the loan. For example, a lender may ask for a personal guarantee of your house or car.
Understanding How to Read the Data
Apart from the jargon mentioned above, you will also encounter some data with your financial agreement. For non-English speakers, this data is not too difficult as it is a numerical system rather than a language system. In this respect, the key skill set to learn is mathematics – commonly known as financial literacy.
For example, lenders may outline how much your future payments will be in the future, and you may need to check the figures and interest rates are correct before agreeing to the contract.
From one set of data to another – credit scores. In the UK every official resident has a credit score compiled by credit reference agencies. These scores are designed to show how much risk you are to financial companies.
If you have a low credit score, also known as a bad credit score or adverse credit score, you will be deemed high risk to financial companies.
If you have a good or excellent credit score you will be viewed as low risk to financial companies.
Finally, for middle credit scores like fair or adequate, you will be considered an average risk to lenders.
How Credit Scores Are Created
The Credit Reference Agencies create your credit score by tracking your financial history and current financial standing.
If you keep up with your monthly payments and only borrow money when you need to, your credit score is likely to improve. If you fail to make payments on your debts or borrow too much money for your income, you will find your credit score drops.
What Can You Do to Improve Your Credit Score
There are several ways to increase your credit score. Whenever managing your personal finances, you should:
- Keep up with all monthly payments.
- Pay off debts whenever possible.
- Only borrow money if you NEED to borrow money.
- Register to vote at your home address.
Advice for Non-Native English Speakers and Bad Credit
If you are learning English and have a bad credit score, you should continue your English learning journey to better understand the financial contracts you have entered.
You can also contact StepChange if you are struggling to get to grips with your debt or need debt advice. StepChange is a free-to-use debt advice charity and will be able to help you with your debts even if your English is not perfect.
The First Bad Credit Comparison Website in the UK
As mentioned earlier, borrowing money should be a last resort and done only when you need to. In the UK, the first bad credit comparison website has been launched to help borrowers with bad credit scores secure competitive finance.
What’s more, you can be pre-approved for your loan before applying which helps limit further damage to your credit score.