When you are looking for a loan, you will run into a lot of terms and features that may not be so easy to understand. Our team works with these terms daily we believe it is our job to educate our customers and help them become comfortable when making the decision to get a loan. To help you make the most convenient and financially sound decisions when it comes to borrowing money, we have put together this simple guide to understand our loan jargon:
APR: This term stands for annual percentage rate, and you will likely run into it when you are talking about most types of loans. The APR is a representation of the interest rate you will be paying in a whole year. Knowing this percentage will help you calculate how much money you will be paying per year for the loan. When you are borrowing money, you will usually want to make sure you do some research to help you find which lending corporations offer lower APRs.
Loan limits: While there are many things that may affect this final number, such as your credit score, or proof of income, most lending companies have a minimum and maximum amount of money they will agree to lend. Before you start the loan application process it’s important to find out how much money you will be able to borrow from your lender. Loan limits are for the most part something positive for borrowers. In most cases, they help make sure the amount that is being borrowed will not be an undertaking for the borrower.
Loan terms: The term of the loan you are taking out refers to the length of your repayment plan. The length will be determined by your lender. In most cases, you will be offered different options to help you finance your debt. The amount of the money you borrow, plus the interest rate, and any other additional charges will usually be divided by the number of months you will have to repay the loan.
Interest rate: This refers to a percentage of the amount you borrow that will be added to your total debt. When you are searching for a new loan you will be looking for the lowest interest rates available. Doing this will help you save money in the long run. Another important aspect to look for are fixed or variable interest rates. A variable rate will likely change through the term of the loan. This will make it harder for you to figure out how much money you will end up paying. Fixed interest rates are more highly recommended. Fixed rates mean the interest will remain the same for the life of the loan until it’s repaid.
Secured loan: A secured loan will require the borrower to use one of his assets as collateral for the money he will be borrowing. There are different items that can be used as collateral, for example; a car, house, and in some cases even jewelry. The reason they are called secured loans is that if a borrower defaults on his payments, the lender can take possession of the assets used as collateral.
Unsecured loan: When the lender asks for no collateral assets to secure the money he is lending, that is called an unsecured loan. This type of loan is usually offered to people who have a good credit history, secure employment, and are looking to borrow an amount ranging from $5,000 to $30,000 dollars.
Extra repayments: When you get a loan, you may be given the ability to do additional payments. This option will allow you to get ahead of your scheduled payments, and help you finish paying the debt quicker than you planned. This is an important question to ask your lender because in some cases, you may be charged additional fees for making extra repayments.
Fees: Most people tend to overlook fees when they begin the process of getting a loan. As a borrower, it is very important to understand the different fees or charges that come with taking out a loan. Most fees are standard, such as origination fees, late payment fees, prepayment fees, and transaction fees. Make sure you know how much each one of these fees will be before you finalize your loan paperwork.
The meaning of these terms for loans may vary depending on the context they are being used in. When it comes to signed agreements, customer disclosures, policies and procedures, and other loan documents, your lender should be able to explain in detail what everything means.
We always encourage our customers to ask questions. Don’t hesitate to ask our team to clarify what a term means. The best way for our corporation to build trust is by being ethical and transparent. Transparency is very important to us, and we always want to make sure you feel comfortable about your decisions by understanding well how our services work.
If you have any question about any other loan teams, contact our team at American Acceptance Corporation.