ALL >> Investing---Finance >> View Article
Some Common Loans Jargon Explained
The world of personal finance can sometimes seem to have a language all of its own, and it can be difficult to seperate the wheat from the chaff when comparing products such as loans. With all things financial, it's vital to have a good understanding of what you're agreeing to before you sign on the dotted line, and so here we explain some of the most common terms you're likely to come across in loan advertisements, application forms, and credit agreements.
- APR
This stands for Annual Perentage Rate, and is basically the cost of the loan. As well taking into account the interest rate you pay, it includes any fees or charges you need to pay. For example, if two loan packages have identical interest rates, but one charges a setting up fee, then that loan will have a higher APR.
- Sub Prime
This is the industry term for applications from people with less than perfect credit ratings. Sub Prime credit is also referred to as adverse credit, and people with poor credit ratings may struggle to get an approval, and even then they're almost certain to be charged a higher rate of interest.
- Advance
This ...
... is simply the financial services industry's word for the amount you borrow.
- Term
The term of a loan is the length of time you agree to repay the debt over. Agreeing a longer term for your finance may result in a lower monthly repayment, but as you're paying interest for a longer period then overall a longer term will usually mean more interest paid overall.
- Collateral or Security
For a secured loan, home loan or mortgage, you'll be borrowing money against the value of your home. Your home is then known as the collateral or security on the loan. If you fail to keep up your repayments, then the lender can sieze your property, sell it, and use the proceeds to clear the debt. Having this option means that there is less risk for the loan company, and so loans with collateral can be advanced to people with poorer credit ratings, and the amounts borrowed can be larger.
- LTV
LTV stands for 'Loan To Value' and is a measure of how large a loan is in comparison to the value of the collateral it's secured on. It is given as a percentage, so a loan of $80,000 secured on a property worth $100,000 would have an LTV of 80%. Lenders like to have a relatively low LTV as this means that if they need to sell a property because of a default on the loan, then they're very likely to receive enough funds to clear the debt, even if they sell at below market value.
- HLC
HLC is an abbreviation of Higher Lending Charge, which is a fee sometimes levied on loans with a high Loan to Value (LTV) ratio. HLCs are normally only imposed when you're borrowing more than 90% of the value of the security, and it should always be made very clear to you before you sign a loan agreement if one of these charges is to be made.
About the author: Martin writes for http://www.unsecured-loans-for-tenants.co.uk/ where people who don't own a property can take advantage of loans even with a bad credit rating.
Add Comment
Investing / Finance Articles
1. Chart Patterns For Effective IntradayAuthor: strike
2. Analysis Of Bank Statements: Essential For Banks And Nbfcs
Author: Aakash Parikh
3. Essential Tips For Buying Crypto Miners: Make Informed Decisions
Author: blockdag
4. Everything You Need To Know About Applying For A Swift Funds Loan
Author: Sofia Alice
5. Finding The Right Mortgage Broker In Abbotsford And Surrey, Bc
Author: Satbir Bhullar Mortgages
6. Jaydeep La Residency Thane Kolshet Road Project 2 & 3 Bhk Flats
Author: akhilagardas
7. Embracing Sustainable Investment With Esg Data & Solutions
Author: By Inrate Team
8. The Importance Of Lead Qualification In Solar Appointment Generation
Author: Shan Tait
9. Setting Up Your Company In Ireland: Key Considerations For Successful Formation
Author: LSC and Partners - Corporate Tax Consultancy LSC
10. Mortgage Lenders edmonton – How Are They Going To Help You
Author: Dominion Lending Centres Ratefair
11. Why Managing An Smsf In Perth Can Maximize Your Retirement Potential?
Author: Daniel Stewart
12. The Future Of Cryptocurrencies: A Look Ahead
Author: Ethan
13. Unlocking The Power Of Biodiversity In Data Solutions & Rating Services
Author: By Inrate Team
14. The Role Of Chartered Tax Advisors: Ensuring Compliance And Maximizing Benefits
Author: Business Tax & Money House
15. Innovative Accounting Solutions For Modern Businesses
Author: Business Tax & Money House