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Common Loan Terms You Need To Know

The following terms and their definitions provide a brief overview of terms you’ll run into when looking at lenders and loans.

Amortization: Calculates the entire loan payment including interest on the outstanding balance which is to be paid off at the end of a fixed period

Annual Percentage Rate (APR): APR is the interest rate charged on the loan. Expressed as a percentage, APR is the yearly cost of the credit

Bad Debt: A debt which is unlikely to be paid, therefore unprofitable to the lender

Collateral: Property put as a security against the amount borrowed

Credit Score: A numerical value used by lenders to predict how likely an individual is to repay a new loan

Creditworthiness: Past and future ability of a borrower to repay debts

Dealer Charges: Amount charged for features sold separately by an auto lender such as undercoating or service offered in warranty period

Default: Failure to repay a loan or failure to meet the terms of the loan agreement

Down Payment: Amount paid by the customer in cash or trade-in value to get an auto loan in order to finance the remaining of the purchase price

Equity: Difference between the market value of a property and the outstanding mortgage on it

Late Payment: A payment made later than agreed upon

Loan Application: Is the primary step in obtaining a loan. It involves filling of the loan application form

Loan Calculator: It determines the amount of monthly payment that a borrower has to pay on the loan borrowed

Prepayment Penalty: A penalty imposed by the bank on the early payments

Term: The specified period of time for which the loan is provided by the lender

Title: A document which gives evidence of an individual’s ownership of a property

Upfront Costs: Any fees or charges that are collected in advance, before a loan is advanced

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3 months ago

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8 days ago

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