A Guide To Loan Terminology

By Author: Bonny Kominek
Total Articles: 32
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Whenever you start looking for a financial product it''s important that you know what you''re looking for so that you can get the best deal for your particular circumstances. Unfortunately, most financial terms come with specialist terms that people may have heard, but may not be perfectly clear on.

When it comes to shopping for a loan in particular, the list of words that you need to know is actually quite short. Here''s a quick guide.

Interest Rate

The interest rate is the rate at which your debts will increase, it''s also commonly known as APR (which stands for annual percentage rate).

In real terms, then, if you took a loan of ?10,000 which had an interest rate (or APR) of 20%, at the end of the first year you would owe an extra 20% of the original sum, meaning that you would owe ?12,000 (assuming you hadn''t paid anything else).

Accordingly, the lower the interest rate, the better the loan may prove to be.

Term

Secured Loans

Secured Loans

A secured loan is one where the debt is literally anchored on another item of value, most commonly your home. If you don''t ...
... meet the repayments (as with a mortgage) then that item of value is forfeit. Secured loans generally have lower interest rates as the collateral makes it less likely you''ll try and default and therefore lenders are more willing to offer longer term deals. Secured loans are often for loans with greater value.

Unsecured Loans

These are the main terms that are important when it comes to selecting a loan but there are many others. The important thing to look for is low APR or interest rate and preferably a short term. When it comes to getting a loan, make sure you shop around thoroughly and get the best deal available.

The ideal loan is one which is unsecured (so you don''t stand to risk losing anything of great value), short term (so you''re not in debt too long) and low interest (so at the end of the deal, you owe as little as possible). Finding such a loan is practically impossible, however, so it''s all about looking around, considering your options and striking a balance. Bonny Kominek is the author of this article. Alliance