If you want to get a loan, you should be ready to hear a lot of financial jargon. We find terms like "Agreement in Principle," "Adjustable Rate Mortgages," "Credit History," and "Equity Release." Getting a loan is like getting a whole new education, no matter how you look at it. If you think you have a good grasp of English, just ask a mortgage salesman for advice on getting a loan. When it's all over, you might feel like a truck full of financial terms ran into you on the way home.
When you look at the basics, though, it's really not that hard. For example, "Agreement in Principle" is just a roundabout way of saying that the lender and the borrower have agreed on the amount of money that will be lent. This amount would depend a lot on things like your credit history, the security you offer, and your current income, among other things.
Are you starting to feel a little lost with all this jargon? Why don't I try to make things easier for you? Your credit history shows whether or not you have paid back loans you took out in the past. If you haven't paid back a loan you took out before, you have bad credit. People will say that you have a good credit history if you have never missed a payment. At this point, keep in mind that a bad credit history will make it hard for you to get loans for the rest of your life.
"Collateral" is the thing you put up as security for a secured loan. Usually, this is a piece of property. An unsecured loan requires no such collateral. If you haven't bought any property yet but want to, you'll hear terms like "Adjustable Rate Mortgages." This is different from "Fixed Rate Mortgages," in which the interest rate stays the same no matter what happens in the market. In a mortgage with an adjustable rate, the rate can change depending on how the market is doing. These days, people can get mortgages with both fixed and changing interest rates.
"Equity Release" could be the right choice for you if you already own a house and are paying a mortgage on it. Equity is the difference between how much your home is worth and how much of your mortgage you still have to pay. Take out a home equity loan to use this equity to pay for other things.
You would be better off if you knew some financial terms before you started looking for a loan. This will help you choose the best loan a lot better.
