Learning everything you need and want to know about loans might seem a little overwhelming. We know that some terms can be confusing, so we want to help put them into simple language that you can understand. Below is a list of key terms to help you become better familiar with loans and the industry language!
Annual Percentage Rate (APR): interest rate expressed as a yearly rate; can be fixed or variable
Asset: any property that has monetary value and can be used as collateral
Collateral: an asset that guarantees the repayment of a loan; if you do not repay the loan, you risk losing the asset.
Credit history: a record of your financial relationships and borrowing/repaying behavior; typically represents a consumer’s ability to repay debts
Debt consolidation: taking out a loan to pay off a number of other loans or debt
Debt-to-Income Ratio: the percentage of a borrower’s debt compared to their total income
Default: breaching a credit agreement; failure to make monthly payments on a loan
Installment: borrowing a specific amount of money and paying it back according to a set payment schedule. Can also represent one payment of an agreed upon amount.
Lien: a legal claim or right for the lender to take possession of property or an asset if the debt is not paid back as agreed.
Personal loan: an unsecured loan taken out over a fixed term; can be used for home improvement projects, medical bills, vacations, etc.
Prepayment penalty: a charge imposed by the lender on a borrower who chooses to pay off part or all of a loan in advance
Principal: the total amount owed on a loan, not including interest
Repayment term: the length of time you need to repay the loan; the longer the loan the lower your payments and the higher the overall interest charges
Refinancing: financing an existing loan with a new lender or; typically used when a borrower wants to lower the monthly payment or interest rate
Secured loan: a type of loan in which an asset is held (used as collateral) by the lender as security for the amount you borrowed; usually offers lower interest rates
Now that you are familiar with popular loan terminology, you should be ready to apply! Click here to apply online today!