Loans – Basic Terms You Need To Know
Loans could be used for various reasons, such as for medical treatments, education, home renovations, working capital, business expansion, business requirement, work requirement, and much more.
Accreditloan.com, for instance, could provide you the loan you require to meet your financing needs. Moreover, they have created cutting-edge digital solutions for the process of applying for a loan to be less complicated. With the unmatched accessibility that they offer, you can now apply for a loan online without trouble. Moreover, with their quick approval process, you could get approved and receive your loan on the very same day you have applied for the loan.
When applying for a loan online with accreditloan.com, you are sure that all your personal information is safe as their system is encrypted making it safe and secure. Moreover, since it is a licensed money lender, not only will all the transactions be legal but the fees that you have to pay are within the bounds of the law.
Basic Loan Terms
Although there a lot of licensed money lender or credit company out there that could provide you the loan you need, only consider taking a personal loan for urgencies, not for you to splurge on unnecessary things.
Personal loans are excellent financial tools; however, you have to make certain that you have the means and are responsible enough to pay it off. Otherwise, you may end up being buried in debt or lose your collateral. To keep your debts under control and even before taking out a loan, it is imperative to understand what loans are, how they are structured and how they work. In doing so, you will be able to make better and sounder decisions and save on money.
For basic knowledge, below are some key terms associated to any type of loan there is.
- PRINCIPAL/PRINCIPAL LOAN. This is the original or initial loan amount that you are to borrow from a money lender, credit company or financial institution which you will agree to repay.
- LOAN TERM. This is the span of time (timeframe) the loan lasts. Within this set timeframe, you have to be able to repay the loan. Every kind of loan have diverse terms. For instance, credit cards are regarded as revolving loans. This means that you could borrow and settle the amount multiple times without the need to apply for a new loan.
- INTEREST RATE. This is the amount charged by the lender for the loan you agreed to borrow which is typically a percentage of the principal amount. It is based on the amount charged to the bank by the Federal Reserves for it to borrow funds overnight. Known as federal funds rate, this is where banks base their interest.
Costs and Fees Connected with Loans
When you have an understating of the costs that is linked to a loan, it will help you determine which loans is right for you and if you will be able to pay it off with the given term.
- INTEREST RATE. Apart from the principal amount, you also have to pay the interest rate which is typically distributed over the loan term. Although you could obtain similar principal amount form various lenders, their interest rates may vary. Hence, shop around before making any commitment.
- APPLICATION FEE. This is the charge for loan approval.
- PROCESSING FEE. This covers the fees needed to process or administer the loan.
- ORIGINATION FEE. Usual to mortgages, this is payment for securing or getting a loan.
- ANNUAL FEE. Common to credit cards, this is a flat amount you have to pay the lender every year.
- LATE FEE. As the term implies, this is an amount you have to pay for any let fee.
- PREPAYMENT FEE. Usual to car and home loans, this is the amount you pay for completely settling your loan early. This is to compensate lenders for not receiving every interest income they could’ve gotten if you hadn’t repaid it, since when you pay off your loan early, they actually lose the amount of income/revenue for the quantity of years you won’t be paying.