A Guide to Common Loan Terms
Many people may wonder about common loan terms? words and phrases that are often tossed about when describing different types of loans that are assumed to be common knowledge.
These common loan terms represent very important parts of the lending process, but to the person who isn't entirely sure what the terms mean they can be quite intimidating and cause the person to feel very uneasy about getting a loan.
They might delay applying for a loan that they need because of a failure to understand common loan terms, and in doing so can miss out on better rates and the potential to save a lot of money in the long run.
Interest, Capital, and Interest Rates
Interest and interest rates are common loan terms that are a key part of the lending process, but many people might not know exactly how interest and interest rates work.
At its most simple, interest is the additional amount that you pay over the loan amount in order for the lender to make a profit off of you doing business with them. In other words, the interest that you pay is the amount that you pay for the service of lending, while capital is the amount that you repay because it is what you borrowed in the first place.
Interest rates are the percentage of the capital that you'll pay in interest? for instance, if you have an interest rate of 5% on a loan then you'll pay an additional 5% to the loan amount in interest.
Annual Percentage Rate (APR)
The annual percentage rate (also known as APR) is one of the common loan terms that some people have the hardest time understanding.
The annual percentage rate is most often seen on credit cards, and is an indication of how much interest you will be charged on your credit card balance over the course of the year.
The lower the APR is on a credit card, then the less you'll have to pay in interest as the year goes by? you should keep in mind, though, that the annual percentage rate can change over the course of the year due to fluctuations in the cost of living, inflation, and a change of interest rates that are set on the national level.
Collateral, Secured Loans, and Unsecured Loans
These common loan terms can cause quite a bit of confusion, especially to someone who is shopping for their first loan.
Collateral is an object of value that is used to guarantee repayment of a loan, and is the difference between secured and unsecured loans.
Secured loans are loans that have collateral backing the loan, and usually have lower interest rates? they charge lower rates for secured loans because if you fail to repay the loan then the lender can take possession of the collateral and sell it to regain their money.
Unsecured loans don't have collateral, but charge higher interest rates in exchange.
Equity
One of the common loan terms that seems harder to understand, equity is a major factor in secured loans that use real estate and the borrower's home as collateral.
Equity refers to the percentage of the home or real estate's total value in comparison to the amount still owed on the original loan used to purchase it which is known as a mortgage.
It's often referred to as the amount of the home or property that the owner actually "owns", as opposed to the portion of the value that's still held under mortgage.
The more money a person pays toward their mortgage, the more equity they have in their home.
You may freely reprint this article provided the following author's biography (including the live URL link) remains intact:
About The Author
John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.
Latest News
 CBS News | One Thing You Can Control: Your Credit Score New York Times, United States - Lurking beyond the devastation in the markets are other problems, like the fact that consumers are having an increasingly hard time getting loans. ... Fed lays out details for bank loans Glossary: Translating the financial crisis Financial Worries, Credit Crisis Are Felt Around the Globe |
 Baltimore Sun | Rescue Part II: Feds Announce More Help for Student Loans Baltimore Sun, United States - As we all know, the credit crunch isn't just affecting mortgages, auto loans and credit cards. It's also hurt student loans. ... Bush administration pledges help for student loans Departments work to assure student loans |
 1010 Wins | Rell Asks Banks To Help Create Loan Pool For Businesses Hartford Courant, United States - M. Jodi Rell met with the leaders of 48 Connecticut banks Thursday to unveil a five-point plan to make it easier for small businesses here to obtain loans. ... UPDATE 1-Connecticut spurs local banks to make loans Rell Proposes Lending Pool To Ensure State Businesses, Homebuyers ... Rell bank plan would help small businesses |
 Family Security Matters | Subprime scapegoats Boston Globe, United States - AMID A GLOBAL financial crisis that began with unsustainable loans to people with bad credit, it was only a matter of time before apologists for Wall Street ... Memo to GOP: Minority Homeowners Did Not Cause Wall St. Meltdown Closing Bell: Fat cat bankers are not the only ones to blame for ... Don’t blame low-income homebuyers for mortgage mess |
 The Associated Press | Vultures circle Wall Street, but hesitate to feed The Associated Press - "There are investors who have pools of loans, and they don't know where the assets are," said Harvey Green, chief executive and president of Marcus ... |
 Malaysia Star | McCain Wants US to Buy Bad Home Loans; Obama Pushes for Tax Cuts Voice of America - Senator McCain announced that as president, he would order the Treasury secretary to buy up bad home loan mortgages. He says the government would ... Video: Character Attacks |
 Los Angeles Times | Battered GM, Ford Call For Quick Issuing Of Government Loans CNNMoney.com - WASHINGTON -(Dow Jones)- US auto makers are ratcheting up pressure on the government to quickly implement a $25 billion loan program approved this fall, ... Video: Money Minute: GM, GE, Oil Car loan fears clobber US auto stocks Car companies cop congressional loans |
 Boston Globe | Meltdown 101: How can the Fed's rate cut help? The Associated Press - That's because the cuts mean that once banks do start lending again, many borrowers will be able to get loans at lower rates. That, in turn, could help ... Fed's new arsenal firing blanks Rate Cut Follows Bailout, But Will It Help? THE FED NOW OWNS THE WORLD'S LARGEST INSURANCE COMPANY -- BUT WHO ... |
Fitch Affirms Cobalt 2007-C3; Assigns Outlooks MarketWatch - Classes G through O have been assigned negative outlooks due to the high concentration of Fitch Loans of Concern. Rating outlooks reflect likely rating ... Fitch Affirms CD 2007-CD5 Commercial Mortgage Trust Fitch Downgrades 1 Class of BACM 2007-2; Assigns Outlooks Fitch Affirms BACM 2007-3; Assigns Outlooks |
 domain-B | Amidst the Current Economic Turmoil, Bank of McKenney Posts Core ... MarketWatch - During the same period, total loans expanded by 4.86% or $5.2 million to the September 30, 2008 balance of $112.2 million. At September 30, 2008, ... Fed Loans $37.8 B to AIG; Prudential Falls Locally, AIG still writing insurance Taxpayer bailout tab could run into trillions |
Resources
-
Bad Credit Loans, Bad Credit Credit Cards - YoureApproved.org!
Personal Loans, credit cards from bad credit lenders including bad credit Loans - high risk unsecured bad credit cards - debt consolidation Loans - payday Loans!
-
Bad Credit Loans - Personal Loans - Credit Cards - Home Loans - Auto Loans - Credit Repair
Bad credit Loans and credit cards - personal Loans - high risk Loans - credit repair - free government grants - government auctions - police auctions - debt consolidation - filing bankruptcy
-
#9654; The Complete Online Guide to Free Government Grants, Business Grants and Government Loans
Government Grants - US government grants provides free government grants, business grants, Government grants.
-
Government Grants, Loans, Federal grants and Grant Money
Government Grants find out how to qualify for Free Business Grants, Government Loans and Free Government Money
-
US Government Grants - Online Directory for Info and Links.
US Government Grants - information on how to obtain free government grants.
-
Government Grants - Free Government Grants - Free Government Cash Grants - Cash Free Government Gran
Free Government Grants and Free Government Money from Government Grants. Guaranteed Government Grants.
-
After Bankruptcy Credit Solutions
Discover how to qualify for credit and Loans after bankruptcy in as little as 30 days!
-
Business Credit Secrets Revealed! - Get Business Credit Cards and Loans
Business Credit Secrets Revealed!
-
The Real Estate IRA: Use Your "Self-Directed" IRA, Roth or 401(k) + Loans to Buy Investment Property
Invest in Real Estate using an IRA, Roth IRA, or Individual 401(k) Plan. Buy Investment Real Estate like houses, condos, apartment buildings, foreclosures and land. Use Loans to leverage your investment. New eBook reveals the real estate information and l
-
bad credit home loan, refinance mortgage loan, cash loan, cash advance loan, california home loan, p
Online bad credit home loan, refinance mortgage loan, cash loan, cash advance loan, personal loan, debt consolidation loan, payday loan, bad credit loan, home improvement loan, second mortgage loan, online loan, unsecured personal loan Search.