Top Ten Terms for Loans
June 20th, 2008 | 
Author: 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.
Posted in Real Estate
These are very helpful terms for anyone who want to take loans.I find it useful for me.
Thats for the tips. Very valuable. I know most of these terms but the definitions helped thanks!
No matter how many times you say it, people do not read what they are signing! It very important to educate people on legal and financial terms but the vary basic advise is “readâ€.
It is astounding what people will do just to get a loan. The loan sharks out there are aware of all this and take advantage of the situation. Noone should take any loan without reading everything.
Great. Thanks for sharing those useful “loan terms”. That would be a great help for those who are planning to take loans online and offline.
Great tips, some people don’t know the difference between a fixed rate and Interest Rate. I think that is the same as compound interest, when your interest rises every month? Right?
Thanks for giving these tips.That would be a great help for those who are planning to take loans online and offline.
A useful glossary – thanks!
Lots of good tips here may I suggest that anyone in the UK looking for mortgage advice use a broker that is whole of market and not working off a pannel.
For those who have a plan to take loans this is a big help. Like nowadays, many people take and sign for a loans without enough understanding on it. Familiarizing terms at the same time it’s definitions to have more knowledge.
well since i am under the loan debt which i am soon going to pay… so i know about these terms already….. anyways thanks for the post
Looks like an accounting review/dictionary for me.Thanks for sharing this, I am an accountant by profession but still its a big help reviewing this matters again.
Thanks for the tips..I can relate because i have experience a loans..but I make sure to deal with it in a right and clean way..
Yes, this is a terrific list – the variable rate is so often overlooked by those who don’t know to ask about it! I’m going to bookmark this article and let all my gal pals know about it.
Hi,Some great tips & tricks here,.Thanks for all the useful info!!Getting home equity loans are fairly easy nowadays.Great info on how to get the money very quick and easy and you don’t have to have any collateral.
If people would heed to this advice there would be less foreclosures, low credit scores and “victims” in the credit market. Good job.
I love to use a few different mortgage brokers for every loan I enter into, it keeps them honest and allows you to get the best deal.
Yes, know the TERMS of the loan. I have seen commercial investors especially sign for a loan that was a 30 year fixed but a 5-8 year term. Preparation for doing a refinance is part of real estate investing. Know when/if your term is coming up.
Thanks for great post. I can use this glossary.
Nice Article and lot of good points which will help the borrowers. I would like to add just one thing that is to get a loan from a good source credit report must be very good also.
Reading the terms and agreements of a document can be tedious but it is only for our own protection. Not everybody reads them thoroughly. At the most, they only scan it. With your post, I hope that people will somehow be more careful before signing anything especially loan documents.
This article really hits a point that I always tell my clients. Often times we would be at the closing table and they would rush through and sign all the documents without looking at them. I’d will them to slow down and read the documents. They would look at me in surprise and tell me they trust me. Then I explained to them that I was not the one that wrote the documents they’re about to sign. Then they got the point and look over everything carefully.
When I first start in the Las Vegas Mortgage business, I would let my clients do as they please. Then one day I got a phone call from a lawyer telling me that her brother did not agreed to the terms of the mortgage he signed for and that I had lied to them. I looked into the matter and it turned out that there was a typo in the interest rate because the documents prep person at the bank entered the wrong key. The matter was taken care of and the client continues to refer me business.
Great review of the basics but the really interesting stuff going on currently is the products that the Fed and the treasury are creating in order to create liquidity in the credit markets. the TALF program in particular allows investors to buy high quality assets from banks at depressed prices and the government will fund 90% of the purchase. Feels like the RTC product that came out during an earlier bank crisis that made investors lots of money.
if only people knew the difference between fixed and variable rate mortgages we might have never had the subprime crisis!
all this and take advantage of the situation. None should take any loan without reading everything??????
Nice, I was actually looking at getting my first loan so is coming in handy.
Reading the terms and conditions are most important part but many times you cant be choosy and settle everything on their conditions.
What a nice glossary… I agree with you that we should at least know what the terms mean before getting ourselves a loan. We don’t want to make reckless choice, do we?
These terms are very useful. Many of them dont know the meaning of these terms. Thanks for the description.