Top Ten Terms For Loans
Top Ten Terms for Loans
Everyone knows that you should never sign on the dotted line without reading the contract .
This same term applies to loans .
Signing a loan without knowing the terms and what everything means can be detrimental to your finances, credit and future investments .
Before you sign on the dotted line, make sure that you know these terms and how they will apply to you .
1 .
Interest rate .
the interest rate is the percentage of your loan that is added on every month .
the percentage will vary according to the economy and will make a difference in your payments .
2 .
Fixed Rate .
a fixed rate will be an interest rate that stays at the same percentage throughout the entire period of your loan .
3 .
Variable Rate .
a variable rate will change according to the economy and the charts that are stating what the rates should be for interest .
a variable rate usually changes every year and adjusts according to a specific given range of percentages .
4 .
Principal .
the principal is what you will be paying on your actual house .
Whatever you pay on your principal is what you will see in the end as your investment .
5 .
Escrow .
This is similar to a savings account of your loan .
Whatever you put in escrow will accumulate without paying directly into the loan .
At the end of the term you can use it to finish paying off the loan or to invest in another loan .
6 .
Title .
a title will be what you get to your home after it is officially yours, stating that the property belongs to you .
7 .
Deed .
a deed will most often be used as a title for a commercial area .
Instead of giving ownership it shows that the property is leased to the one who is using it as a business .
8 .
Home Equity .
This is a loan or line of credit that you can get for your home .
It will finance up to eight percent of your other loan and get paid back later .
This helps if you want to consolidate loans or invest more into the property .
9 .
Appraisal .
After an inspection of the home is made, an appraisal will be made .
This will be an estimated value of what the home is worth .
10 .
Equity .
This will be the actual amount of the property that you own .
Most likely, it is what is being paid off of your principal amount .
Once you know some of these basic terms, you will be able to expand on your knowledge and find the exact loan that will fit your needs .
These basic definitions will help you in making the right decision for the type of loan that you want .
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