There are many things that you need to know before you get a consumer loan. Some things are pretty simple – like there are many types of consumer loans that you can get. These include mortgages for homes and auto loans for vehicles.
Another thing that most people already know is that you need to find a reputable lender. You want to make sure that you find the lowest interest rate – or laveste rente – so that you won’t have as much to pay throughout the life of your loan. You can do some research to find a reputable lender that has the lowest interest rate.
This article will help you to learn a little more about consumer loans, with some terms that you should know. It can help you to understand your loan and the paperwork that goes along with it. You should always ask the lender if they start talking about things that you don’t understand.
More Things You Need to Know
1. Term – The term of the loan is the number of months that you will pay for it. This can be a short time for personal loans, or much longer for mortgages. The shorter the term, the bigger your monthly payments will be. A shorter term could also have you paying back less over the loan of the life because you will be saving on interest payments.
2. Fixed Interest Rate – You can have either a fixed interest rate loan or a variable interest rate. The fixed interest rate means that you will pay the same interest rate throughout the life of the loan. This can help you to plan your monthly payments because they are the same each month. With a variable rate, the interest rate can change based on the market conditions and the economy. That means that your monthly payment will change – it can go up or down depending on those conditions.
3. Annual Percentage Rate (APR) – This is the combination of the interest rate and other fees that are attached to your loan. This is usually shown as a percentage and people often confuse it for the interest rate. This number helps you to compare one loan with another and it be on the same wavelength. The Truth in Lending Act states that the lenders must share the APR and any other important information when they offer you a loan.
4. Prepayment Penalties – These penalties come in when you pay off an advance early. The lender will often charge this fee to compensate for interest payments that are lost because you paid it off early. These penalties need to be disclosed to you before you sign any paperwork, it is illegal not to share this information. These are just another fee that you need to be aware of so that you can be prepared for it if you decide to pay off your advance early.
5. Secured and Unsecured Loans – A secured advance is one that you must provide collateral for. Collateral is something of value that you use to secure the loan. For a mortgage, this would be your home and an auto loan, it would be your vehicle. If you have secured advance, you might get a lower interest rate. An unsecured loan is one that does not require any collateral. These usually have a higher interest rate.
6. Amortization –
The process of paying down your loan with equal monthly payments is called amortization. At the beginning only a small portion of your payment goes to the principal – or the original amount that you borrowed. The rest goes towards the interest payments – which is the amount of money that you promised to pay the lender for the privilege of borrowing the money. As you pay off the advance, more money goes towards the principal until it is eventually paid off. You can learn more about amortization here:https://www.investopedia.com/terms/a/amortization.asp
. This is an important term for you to know.
7. Debt Consolidation – This is when you have several debts that you must pay each month and you want to combine all those debts into one payment. Usually this is done when you want to get smaller interest payments, but it is also done when you are overwhelmed with debt. These are different types of advances that can save you money over time, especially when you have many debts with different interest rates.
8. Refinancing – Some people want to refinance loans, usually home mortgages or auto loans, because they have a lower interest rate that they have found for a new advance. This can also happen when the person’s financial standing has improved. For example, the person could have paid off all their debt and cleaned up their credit history, so their credit score has gone up. This means that the interest rate will likely go down. This will decrease the monthly payments and allow them to pay off the loan more quickly.
9. Credit Report – Most lenders will ask for a credit report before they approve you for an advance. This is a detailed report of your credit history that will include any credit information that you have. If you have received credit for anything in the past, it will be on the credit report. It will tell how many payments you made on time and how many you were late on. It will also tell how many previous debts were paid in full. It also has things such as repossessions, foreclosures, and bankruptcies that you might have had.
10. Credit Score – This is what lenders are looking for when they are looking at your credit report. The credit score is a combination of all your credit – good and bad. The higher that your credit score is, the better interest rates that you will get, and of course, the lower your credit score, the higher your interest rates. If you have had a good credit history, you will have a higher credit score. You can check your credit report and make sure that there are no mistakes on it before you apply for a loan.
There are many terms that you need to learn when you are deciding on a loan. You need to know these terms so that you know what you are signing. If you don’t understand any of the terms, you should ask your lender what it means. You don’t want to sign anything if you don’t understand the words that are in the contract. You are legally responsible for what is in the contract, so you want to make sure that you understand it.