Looking to get your first loan? Feel dazzled by the use of financial terminology? Don’t worry and read on further for some basic things you need to know before borrowing money under a loan. We discuss here some terms that you will frequently come across while applying for a loan.
Secured and Unsecured Loans
There are two types of loan that are offered by lenders. The one type in which the borrower offers some asset to the lender in return of cash is called as the secured loan. Unsecured loans do not require the borrower to offer any security and often come with a higher interest rate.
Collateral
When a borrower applies for a loan, he pledges some property or personal asset to the lender as a security. This collateral can be sold off by the lender if the loan in not repaid.
Interest
Interest is the fee charged by the lender for the amount and duration of the loan. The interest rate is the percentage, of the principal amount borrowed, that will be charged as fees for certain duration of time.
Securities
Any asset having value and which can be traded is known as security.
These were some of the most basic terms you need to know when you apply for a loan. Be sure to go through the rules and regulations of the financial organization from which you intend to borrow a loan.
