Guide to Loan Terms
Listed below is a guide to loan terms. It is a useful list of definitions of loan terms that may or may not be familiar to you. Keep it nearby as you will never know when you might need it for quick reference.
AccrueProcess in which interest accumulates on a borrower's loan.
AmortizationA repayment method in which the amount you borrow is repaid gradually though regular monthly payments of principal and interest over the term of the loan.
Annual Percentage Rate (APR)The APR shows the cost of a loan expressed as a yearly interest rate, including the interest and other fees associated with the loan.
ApplicationFirst step in the official loan process to gather and record information about the potential borrower.
BorrowerPerson who has been approved to receive a loan and is then obligated to repay it.
CapitalizationAdding unpaid accrued interest to the principal balance. Capitalizing interest increases the principal amount of the loan and the total cost of the loan.
CollateralProperty pledged as security for a loan to ensure repayment of a loan.
Credit Agencies/Credit BureausOrganizations that collect individual consumer credit information and provide credit reports to potential lenders.
Credit HistoryHistory of an individual's debt repayment. For most types of loans, lenders use this information to gauge a potential borrower's ability to repay a loan.
Credit RatingGrade assigned to denote the net worth and credit standing of an individual or a business.
Credit ReportRecord that lists all past and present debts and the timeliness of their repayment and documents an individual's credit history.
DebtAmount owed to another that must be repaid.
DefaultFailure to repay a loan according to the terms of the loan.
DelinquencyFailure of a borrower to make a timely payment on a loan.
InterestFee charged for the use of money.
Interest RateThe amount of interest charged on a loan, usually expressed as a percentage.
LenderEntity that provides loan funds to the borrower. Depending on the type of loan, the lender may be a bank or other financial institution.
LoanMoney borrowed from a lending institution, usually repaid with interest.
Loan ApplicantParty applying to the lender for a loan.
NoteBinding legal document you sign when you get a loan. It lists the conditions under which you're borrowing and the terms under which you agree to pay back the loan (also called a promissory note or a mortgage note).
PaymentPeriodic (usually monthly) instalments paid to a lender to be applied toward repaying your loan.
PrincipalLoan amount borrowed from a lender, not including interest or additional fees.
RepaymentProcess of paying back borrowed money.
TermTime limit within which a loan must be repaid.
Variable Interest RateInterest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.
You may freely reprint this article provided the author's biography remains intact:
John Mussi is the founder of Direct Online Loans who help UK homeowners find the best available loans via the
http://www.directonlineloans.co.uk website.
John Mussi
