Given below are the different terms used in Loans.
Accrue - Process in which interest accumulates on the
loan taken by a borrower.
Amortization - It is a repayment method which enables
the borrower to reduce his debt gradually through monthly payments of
principal.
Annual Percentage Rate (APR) - In simple terms APR is
the interest rate charge on your loan. It shows the cost of a loan expressed as
annual interest rate, including the interest and other fees related with the
loan.
Application - It is the initial step in the official
loan process for gathering and recording information related to the potential
borrower.
Borrower - Person who receives funds in the form of a
loan and is obligated to repay the loan in full under the conditions of the
loan.
Capitalization - Adding unpaid accrued interest to
the principal balance. Capitalizing interest increases the principal amount of
the loan and the total cost of the loan.
Collateral - Collateral or Securities is the property
pledged by a borrower to secure repayment of a loan.
Credit Agencies/Credit Bureaus - Organizations that
collect the credit information on individual consumer information and provide
credit reports to potential lenders.
Credit History - Credit History of an individual's
debt repayment. It is a statement of the debts and obligations, whether current
or past, of a person which helps a lender to assess the risk of a loan to that
person.
Credit Rating - It is the grade assigned to denote
the credit standing and net worth of an individual or a business.
Credit Report - Record that lists all past and
present debts and the timeliness of their repayment and documents an
individual's credit history.
Debt - Amount owed to another that must be repaid.
Default - Failure to repay a loan according to the
terms of the loan.
Delinquency - It is the failure of a borrower to pay
an obligation when due.
Interest - Fee charged for the use of money.
Interest Rate - The amount of interest charged on a
loan, usually expressed as a percentage.
Lender - A financial institution, agency, or school
that offers home loans. Lender is also referred to as a creditor.
Loan - Money borrowed from a lending institution,
usually repaid with interest.
Loan Applicant - Party applying to the lender for a
loan, i.e. borrowers.
Note - Binding 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.
Payment - Periodic (generally monthly) installments
paid to a lender to be applied toward repaying your loan.
Principal - Loan amount that is borrowed from a
lender, without including interest or additional fees.
Repayment - Process of paying back borrowed money.
Term - Time limit within which a loan must be repaid.
Variable Interest Rate - Interest rate that changes
periodically with respect to an index is called Variable interest rate. As a
result, payments may also increase or decrease accordingly.
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