Beginners Guide To Loans And Loan Taking

With loans available for any amount with fewer documents and easy repayment terms these days

, people find it convenient to apply for loans. They often sign on the dotted line of the loan application forms and agreements, without knowing their language and jargon terms. This guide will help in learning some of those terms so that next time one visits the lender, he or she may not feel less informed.

Types of loans: there are many types but for our purpose, it is sufficient to know the two: secured loan and unsecured loan. Secured loans are given only against a collateral or security. Often the asset you are taking the loan for itself serves as the collateral, for example home or car. The creditor will have lien or charge on the asset until the debt obligation is fully complete. Unsecured loans are not tied to collaterals and are generally given against the proofs of income or past credit history, for example personal loans, credit cards and medical bills.

Personal loans: also called signature loans (as they require a few, often one signature), these are unsecured loans available on producing the relevant proofs of income. Personal loans are of many types: business loan given against business income statements, payday loan against salaries, car loan, student loan or home improvement loan.

APR: textbooks usually define interest as either simple or compound rate but in reality, interest on personal loans, mortgage loans and credit cards is called annual percentage rate or APR, which is the annualized rate of interest (for whole year) as opposed to monthly rate. APR may vary from country to country and lender to lender. In general, there are two types of APR: the Nominal APR (the simple interest rate applied for a year) and the Effective APR (compound interest + loan servicing charges and fees applied across a year).

Debt consolidation: if one has different debts running concurrently like personal loan, car loan, credit card and store card, the monthly payments can shoot up. Instead of paying separately for each loan, one can merge and pay them all off and reduce the monthly repayments. People with bad credit history can also avail bad credit loans or debt consolidation loans to clear the existing debts.

Payment protection insurance: it is an insurance to indemnify the creditor in the event of unforeseen circumstances like illness, accident, hospitalization and death happening to the borrower.

by: Finanxo

POST COMMENT

Moms - Do You Make Time For Yourself? No Good To Charge The Battery Itself. Demand For Self Storage Find The Good Deals: Go To Las Vegas And Have Yourself A Deal Of Good Times Forgiving Yourself For Cheating On Your Wife How Can Budapest Restore Economic Self Rule? How To Protect Yourself And Your Things While Moving Important Tips Playing A One Handed Drum Roll For Beginners Self Directed Iras Are Popular Take Better Care Of Yourself; Complications Arising From Un-treated And Mismanaged Diabetes Reading Improvement Strategies That Enable Reading Speed Increase Camping Air Mattresses Beds For Camping