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There are a lot of companies that offer personal loans for all different types of credit. Knowing some basic terminology can help you better understand the different types and terms of the loans.
Annual Percentage Rate (APR)
The annual percentage rate (APR) is a term representing the total cost of the credit. The APR of a loan is the total finance charge, including interest and other fees and is expressed as a yearly rate.
Automatic Payments
Automatic payments can be set up so that the lender will debit your account to make the monthly payment obligation. In most cases, you get to decide when you want the transaction to happen every month and you may even be able to receive a discount on your interest rate if you sign up for automatic payments when you apply.
Collateral
Collateral can be any type of personal property, such as a house, car, stocks and bonds, a boat and etc., that is put up as a guarantee that you will repay your loan.
Consumer Reporting / Credit Agencies/ Credit Bureaus
These are organizations that collect individual consumer credit information and provide credit reports to potential lenders, employers, landlords and etc., for the purpose of aiding in their decision making process.
Debt consolidation
A debt consolidation is a strategy in which you consolidate all of your high interest debt into on low rate loan.
Fixed interest rate
The fixed interest rate is an interest rate that will not change during the life of the loan.
Interest
The interest is the term for the amount you pay to use money. Interest is always expressed as a percentage of the amount you borrow. It does not include extra charges such as fees. These fees are included in the Annual Percentage Rate.
Pre-payment penalty
The pre-payment penalty is a fee charged to a borrower who pays off a loan before it is due. Most lenders do not charge a pre-payment penalty but be sure to check that before accepting any loan offer or terms. Lenders that do charge a pre-payment penalty charge the penalty so they can make more money on you.
Prime Rate
The prime rate is the rate that is the most favorable interest rate charged by lenders on a short-term loans to qualified customers. There is also a prime rate average listed in the Wall Street Journal and that is an average of what the largest commercial banks charge. Rates (APR's) are established as the prime rate plus an additional amount set by the lender.
Principal
The principal is the amount that you borrow, not including interest.
Term
The term is the time limit in which the loan must be repaid.
Variable interest rate
A variable interest rate is the interest rate that is tied to an index, such as the Wall Street Journal Prime, and fluctuates during the life of the loan or line of credit.
Unsecured Personal Loan Payment Calculator
(This calculator is considered reliable, but not guaranteed.)
Personal Loan Terms Glossary
Loan Amount The loan amount is the total amount of money that you plan on borrowing. For example if you applied for a $20,000 personal loan - you would enter 20000 in the 'Loan Amount' field.
Quoted Interest Rate The quoted interest rate is the cost of financing the personal loan. The lender will provide this rate to you based on the information within your credit history. For example if you were quoted a interest rate of 10.5% - you would enter 10.5 in the 'Quoted Interest Rate' field.
Term The loan term is the total amount of time that plan on financing your personal loan. In most cases personal loans are financed between 1-5 years but can be longer depending on your credit history and the lender financing the loan. Please select the number of months that you plan on financing the loan from the drop down menu.
Estimated Monthly Payment The estimated monthly payment would be the amount of money that you would be required to pay back to the lender on your personal loan on a monthly basis. This field will be calculated based on the loan amount, quoted interest rate and loan term that you provide.
Total Cost The total cost is the amount of money that you will pay on the personal loan. This amount is the total of the loan amount plus interest charges. This field will be calculated based on the initial loan amount plus the total amount of interest charges.
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