If your like many, you don’t always understand what people are talking about when it comes to loans. Without understanding the basic terminology when it comes to loans you just aren’t setting yourself up right to make an educated decision when it comes to applying for a loan. There are hundreds of terms; Below are some of the most important:
Assets Assets can be described as anything that holds value. Assets can be all types of things from cars to houses. Assets can be used in helping to build credit. For example if you are applying for a house loan, you might use your car as an asset, to show that if you default on a payment, that you have assets to fall back upon such as your car.
Capital Capital can be a bit of tricky term as it can be used in several different situations to do with finances. Capital can be described as the assets that are available for use towards creating further assets; it can also apply to the cash in reserve, savings, property, or goods.
Debt Debt is amount of money or something of value that is borrowed from a person referred to as a debtor. Usually a debt that is borrowed will carry some type of penalty along with the payback such as an interest, or service.
Debt Consolidation Debt Consolidation is replacing multiple loans with a single loan that is normally secured on property. This can often reduce your (the borrowers) monthly outgoing interest payments by paying only one loan which is secured on the property sometimes over a longer term. Because the loan is secured, the interest rate will generally be considerably lower.
Equity Equity is the difference between the value of a product (for example a house) and the amount that is owed on it.
Liabilities Liabilities refers to the sum of all outstanding debts in which a company or individual owes to it’s debtors.
Principal Principal is used to describe the amount of money that is borrowed without including any interest or additional fee’s.
Term Term refers to the length of a debt agreement. For example if you were to take out a loan for a house over 10 years. 10 years would be the term.
--
Feel free to reprint this article as long as you keep the following caption and author biography in tact with all hyperlinks.
About the Author
Ryan Fyfe is the owner and operator of Loans Area. Which is a great web directory and information center on Loans and related issues like Debt consolidation and Credit issues.
Written by: Ryan Fyfe
100% Home Mortgage Refinance – Choose A Lender Online
100% home mortgage refinance frees up your money for other purchases, like a second home, renovations, or debt consolidation. To get the best deal on your cash out refi, look online for your next lender. By evaluating loan quotes that you can get...read more
Best Refinance Mortgage Rate - Improve Your Odds Of Getting A Low Rate
Obtaining a mortgage refinancing has several benefits. However, the only way to realize these benefits is to qualify for a low rate mortgage. Even though refinancing a home is ideal for securing a fixed rate mortgage, without acquiring a lower...read more
Six Ways Under Your Nose To Finance Your Home Business
There are lots of ways to get additional capital to expand a home-based business. But before you look outside for financing, leaving the decision about your company’s progress and merits to someone else, consider these six ways under your nose to...read more
Using the Internet to Find Personal Finance
Many people worry about the best way to keep track of their
personal finances, yet at the same time overlook one of the best
tools at their disposal for keeping their finances in check. By
utilizing the power of the internet it's possible to keep...read more
War Of The Worlds: Student Finance Versus Life
It’s a worrying time for current and prospective students. Figures from the Prudential, show that a third of UK university students have considered abandoning their studies due to the financial strain they have encountered. It is not surprising that...read more
