Top 10 Personal Loan Terminologies Used in Finance World
Politics

Top 10 Personal Loan Terminologies Used in Finance World

46
Top 10 Personal Loan Terminologies Used in Finance World

Millions of Americans use loans to cover unexpected expenses, home improvements, debt consolidation and much more. It seems the basics are quite straightforward like the one that avails student loans for higher studies, the one for a loan to buy a car, a mortgage loan to purchase a house and so on and so forth. To add to the list these days there is one more loan type that is gaining rapid fame as it is flexible, easy to apply for, usually offers low interest rates (if your credit score is good) and the loan amount is smaller when compared to other loan types. By now you should have guessed it right, as it is called a personal loan. Make https://www.achievefinance.com your finance partner and apply online today!

Recent developments in loans can be attributed partly to the financial crisis, to the historical regularities taking into account the severity of the past recession and the loan supply factors exerting a considerable descending pressure on loans growth since the beginning of the financial tensions that started around a decade ago. As a result these days lending options are many like- banks, p2p lending, credit unions and the latest -online lenders. Online lenders are introducing new types of loans to make it easier for customers to avail and utilize. Any loan sanctions are generally based on a combination of the borrower's income, the credit history and the loan terms.

So if you have thoughts about taking a loan for any reason, it is good to know a few prevailing loan terminologies before jumping the bandwagon. Here are the top ten:

1. Annual Percentage Rate

  • APR stands for Annual Percentage Rate and in a simple language it is the numeric representation of your interests rate expressed as a percentage depicting the actual yearly cost of your funds over the period of a loan.
  • It can be fixed or variable.
  • Types of APR include purchase APR, cash advance APR, promotional APR and penalty APR.
  • According to the division of finance in Missouri, the APR=FEE (Origination fee + Interest) ÷ Amount Financed ÷ Number of days in loan × 365 × 100

2. Credit History

  • It is basically a record of consumers. From that, one could check the borrower's ability to repay debts and acts as a demonstration of a responsible debt repayment over a period of time.
  • It is represented through a credit report sourced by banks, credit card companies, collection agencies, governments and it includes the details of the consumer's credit account like when it was opened, the account balance, transactions history and other information.
  • One can call the Annual Credit Report at 1-877-322-8228 and follow the instructions to check their credit history.

3. Collateral

  • According to Investopedia, a collateral is a property or other asset that a borrower offers as a way for a lender to secure the loan. If the borrower fails to make promised loan payments, the lender can seize the collateral to recover its losses.
  • Loans backed by collaterals typically have lower interest rates compared to unsecured loans.
  • House or home equity, cars, your investments and savings can be assets that could help you qualify when borrowing with collateral loans.

4. Debt-to-income ratio(DTI)

  • DTI or debt-to-income is calculated by dividing total recurring monthly debt by the gross monthly income, and expressed as a percentage.
  • It is a method to measure an individual's ability to manage monthly payments and debts.
  • Low DTI means you are less risky to lenders.

5. Debt-Consolidation

  • It simply means taking out a single loan to pay off a number of other loans/ debts.
  • Helps to pay off a number of liabilities and mostly unsecured consumer debts.
  • Multiple debts are combined into a larger piece of debt with favorable payoff terms like a lower interest rate or lower monthly payment or both.

6. Lien

  • It is a legal claim or the right for the lender to take possession of a property /an asset if the debt repayment doesn't happen as agreed.
  • In legal terms it is a formal document signed by the party to whom money is owed and sometimes by the debtor who agrees to the amount due.

7. Principal

  • It is the total amount owed on a loan excluding interest or the money that you originally agreed to pay back.
  • We all are aware of the simple interest calculation formula [A=P (1+RT)] which implies the cost of borrowing based on the principal amount.
  • Any payment made on a loan will be applied first to any fees that are due for example, late fees then the rest of your payment will be applied to the principal balance of the loan.

8. Installment

  • It is defined as a sum of amount payable as one of several equal payments for something, spread over a contracted duration that may be months or years.
  • Having a loan of a specific amount that is paid back according to a set schedule.
  • It can also be single payment.

9. Repayment Term

  • It is the amount of time or the duration within you need to repay the loan.
  • The longer the loan the lower your payments but higher are the overall interest charges.
  • Periodic payments include part principal plus interest.
  • Can be monthly, semi-annual or annual for long term loans.

10. Prepayment Penalty

  • Some lenders impose charge/fees on a borrower who opts to pay off part or whole of the loan in advance. This is known as prepayment penalty.
  • Lenders do this to mitigate prepayment risk because if the borrower pays the loan off early lender loses future interest on the loan payments.

Your rate on loans may vary substantially based on the lender you choose. Several new lenders have entered the market and for a while, American consumers did not have that option. With the rapid growth of online lending, consumers finally have a choice and now that you are well-known with popular loan terminologies, hope you are ready to apply.

Report this Content
This article has not been reviewed by Odyssey HQ and solely reflects the ideas and opinions of the creator.
Swoon

119 People Reveal How The Pandemic Has Affected Their Love Lives, And Honestly... Relatable

"I haven't been able to get out of the 'talking phase' with anyone."

The reality is, there's no part of life the pandemic hasn't affected. Whether it's your work life, your home life, your social life, or your love life, coronavirus (COVID-19) is wreaking havoc on just about everything — not to mention people's health.

When it comes to romance, in particular, people are all handling things differently and there's no "right way" of making it through, regardless of your relationship status (single, taken, married, divorced, you name it). So, some of Swoon's creators sought out to hear from various individuals on how exactly their love lives have been affected since quarantine began.

Keep Reading... Show less
Entertainment

7 Things You Need To Know About Our NEW Bachelorette, Tayshia Adams

Could THIS be the most dramatic season in "Bachelorette" history?

Bombshell news coming from Bachelor Nation today, Tayshia Adams is replacing Clare Crawley as the bachelorette!

Rumor has it that Clare found her person early on in the process and did not want to continue with the process of leading other men on throughout the season.

Keep Reading... Show less

The NBA is back, and for basketball fans, like myself, it has been the BEST news we have heard since COVID-19 shutdown play indefinitely. I mean, come on, we need to see if James Harden can once again perform so well he has back-to-back 50 point games, Kawhi can lead another team to the championship title, and whether Giannis is going to be back-to-back MVP... among like 500 other things running through our heads!

In the midst of all of the amazing statistics and records that these players are breaking, though, we also just love the NBA because well, there are some pretty good looking guys out there. Here are the 19 hottest NBA players (in no particular order) you would totally let slam dunk on you now that the NBA has returned.

Keep Reading... Show less
Health and Wellness

Everything You Need To Know About Macronutrients, Because A Diet Should Be More Than Calories

Pay attention to what you're eating, not just how much you're eating.

Plenty of people are familiar with the "calories in, calories out" (CICO) method of dieting which can be used for losing, gaining, or maintaining weight. This method relies on calculating a person's total daily energy expenditure (TDEE) to ensure that they are not overeating or undereating to achieve their desired weight. TDEE considers a person's height, weight, age, gender, and level of activity to determine what their caloric intake should be — some calculators can factor in body fat percentage as well. When I used a TDEE calculator online, it said that my TDEE would be 1,990 calories if I was trying to maintain my weight, but are all calories created equal? I'd argue that they're not.

It might seem obvious to some of you that 1,990 calories of macaroni and cheese are not healthy at all compared to 1,990 calories of varied foods (fruit, veggies, meat, bread, etc.).

Keep Reading... Show less
Swoon

Just Because You're Asked To Be In A Wedding, Doesn't Always Mean You Should Say Yes

If you can't invest time, money, and YOURSELF, maybe say no to the offer for the bride's sake!

Being in a wedding is a really big commitment. I personally think if you've never been in one before, you don't understand the time, money, and energy that goes into being a part of it.

Keep Reading... Show less

- Though as a little girl, I had the silkiest, softest hair that would get compliments everywhere I went, since I turned about thirteen I've since had coarse, dry hair no amount of deep conditioning masks or sulfate-free shampoo could fix.

- I started using the Raincry's Condition Boar Bristle Brush several months ago, and while I noticed that my hair had been softer, silkier, and shinier than it had ever been, I didn't make the connection because I never thought a simple hairbrush could make any difference in my hair texture.

- I will be the first to admit that I thought it was ridiculous to spend nearly a hundred dollars on a hairbrush, but this one eliminates the need for me to use any heat tools or styling products on it.

- I put some oil or a serum in my hair when it's wet, brush my hair with the boar bristle brush once it's dry, and end up with the lowest maintenance, shiniest hair I've had since I was 8 years old.

@raincrybeauty

Keep Reading... Show less
YouTube

Bingeing a romantic comedy is always a good idea, and during this pandemic, these movies bring us one of the only elements of romance we can get. Through all the break-ups, obstacles, and struggles in our love lives, romantic comedies have always been there to make us laugh and keep us company while we cry.

While we love these movies for the beyond gorgeous male love interests, the female protagonists are still the ones we always remember. Although rom-coms are far from reality, it is always fun to imagine what our life would be like if a cinematic studio was behind our love life. So what does your favorite romantic comedies say about your dream guy?

Keep Reading... Show less

Whether you're in an unhealthy relationship currently, you know someone who is, or you just want to have these numbers saved just in case it could one day save someone's life (if not your own), this article is for you. Here are three numbers to save in your contacts ASAP so you can always be safe, both physically and mentally, in every relationship.

Keep Reading... Show less

As any poor college student, a little kick of caffeine for less than a dollar has always sounded great to me. So, naturally, AriZona Iced Tea has been a go-to for as long as I can remember.

Keep Reading... Show less
Politics and Activism

Dear Closeted Latina,

You were never alone.

Remember how the Latin world got rocked when Ricky Martin came out?

Keep Reading... Show less

If you're anything like me, you're probably anxious about going back to college. The uncertainty of nearly everything is stressful and makes it difficult to prepare for going back to campus. Take it one step at a time and remain calm! If nothing else, take a look at this list of six essentials for living on campus during the COVID-19 pandemic! You got this!

Keep Reading... Show less
Facebook Comments