Travelling through the world of finance can be difficult, especially when you don’t understand all the terms being used by lenders. It is then important for you to learn these personal loan terms so that you can simplify the process, understand it better and ensure that you are getting the loan you want.
Here is a look at 10 personal loan terms you need to know.
The Annual Percentage Rate
The annual percentage rate or APR is the annual loan cost that is expressed as a yearly percentage. The APR will include any fees you pay, the interest rate and the insurance premiums paid to the lender.
At the end of your loan term, you will need to pay a lump sum, which is the balloon payment.
This is a real and tangible asset that holds a value, that you guarantee the lender in exchange for the loan.
This is what occurs when you fail to repay your loan according to your loan agreement.
Fixed Rate Loan and Adjustable Rate Loan
A fixed rate loan is where the interest rate that you pay is locked at a certain rate by the lender for the term of the loan. Adjustable rate loans are where the interest rate fluctuates according to the market throughout the term of your loan.
The lending agreement also called a loan contract is a legally binding document that states the terms of the loan between you and the lender.
This is the length of time that you are given to repay the loan. This term can be expressed in weeks, months or years.
This is a type of loan, where you are able to borrow and repay up to a specific limit, whilst the loan is active, like a credit card.
Secured Personal Loans
These type of loans will need you to provide collateral to the lender in order to secure the loan.
Unsecured Personal Loans
With this type of loan, the loan amount is secured with your signature and this is the only guarantee for the loan.
You need to know these basic terms so that when you are looking at personal loans, you understand more about what is being offered by the lender.