Getting the Hang of Loan Lingo

By: Ajeet Khurana

You will definitely be attacked by financial jargon if you ever go loan shopping. We discover terms like "Agreement in Principle" and "Adjustable Rate Mortgages" to "Credit History" and "Equity Release". Going shopping for loans can be a very educational experience. If you are certain that you have a flair for English, just try asking a mortgage salesman for loan advice. By the time he is done giving you advice, you might just come home feeling like you speak in a very different language from that of your mortgage salesman friend.

However, it really is not all that difficult when you try to understand the basics. For instance, "Agreement in Principle" is simply a long drawn-out mode of talking about the agreement that is made between the lender and the borrower as regards the amount of the principle. To a large extent, this amount would be governed by aspects like your credit history, the collateral that you are offering, and your current income among other things.

Are you already feeling a little amazed by all this jargon? If you want a basic explanation of a some financial jargon, read on. Credit history refers to whether or not you have repaid loans that you had taken earlier. If you have been a defaulter on a previous loan, you have a bad credit history. If you have not defaulted, you will be said to have a good credit history. At this point, let me remind you that you need to avoid getting a bad credit history as this will hamper you chances of getting loans later on.

"Collateral" refers to the asset (usually property) that you use as security exploit a secured loan. An unsecured loan requires no such collateral. If you do not own any real estate yet but are hoping to sometime soon, you will perceive all kinds of mortgage terminology like "Adjustable Rate Mortgages". This is quite separate from "Fixed Rate Mortgages" where the interest rate is fixed and it is not affected by market conditions. In an adjustable rate mortgage, the rate may vary in proportion to the market conditions. These days, one can easily find mortgages that have a combination of fixed and adjustable rates.

If you already own a house, but are paying mortgage on it, "Equity Release" could be ideal for you. Equity means the difference between the value of your home and the mortgage amount that remains pending. Free this equity by getting hold of a home equity loan to help you make the most of your house's value.

Acquaint yourself with some financial lingo before you embark on you search for the ideal loan. Life is significantly easier for the loan seeker who has a better understanding of the lingo.

Most Read Articles On
"Loans"
Loans
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 
 • 

» More on Loans
 



Share this article :
Click to see more related articles