A personal loan is a big decision and you need information to choose wisely. Nonetheless, that\u2019s hard if you don\u2019t understand personal loan terms.<\/p>\n
Luckily, we\u2019ve condensed loan terminology into this personal loan glossary to help you. If a term isn\u2019t listed here, ask the lender for clarification before signing your loan agreement. Lack of information and other mistakes<\/a> can lead to loan denials.<\/p>\n This loan terminology is often used for fixed interest rate personal loans. It describes how each scheduled payment pays a portion towards the principal first and the balance towards outstanding interest.<\/p>\n The annual percentage rate<\/a> is a very important personal loan term, because it reflects your true cost of borrowing. This loan terminology describes your interest rate and other finance charges, which can drive up your costs. Every lender must disclose the APR<\/a> on their loans.<\/p>\n An application fee isn\u2019t typical for personal loans. Yet, some lenders levy it just to process your application. Always check for this personal loan term, or you could pay unnecessarily.<\/p>\n You may see this personal loan term mentioned in your loan agreement. \u2018Falling into arrears\u2019 basically means your loan is overdue. Lenders calculate the amount of arrears from you\u2019re the date of your first missed payment date until the current date.<\/p>\n An automatic payment describes a lenders system for withdrawing your personal loan payment directly from your bank account each due date. It is a way to simplify your finances, providing you ensure funds are available. Otherwise, you could face additional fees.<\/p>\n This is a typical loan term you will see in every loan agreement. The borrower is the person that applies for the loan, receives the funds, and is legally bound to repay the loan as agreed.<\/p>\n This is a personal loan term you should pay close attention to. When a loan is backed by collateral, it means it is backed by an asset. Examples of collateral include cash, investments, vehicles, and real estate. If you do not repay your loan, the lender can seize your asset. Collateral is not necessary for all personal loans (see unsecured loan<\/a>).<\/p>\n This loan terminology only appears when another individual agrees to share the responsibility of repaying a personal loan. The lender considers both incomes in the qualification process, but both parties are responsible for the full amount. If one party fails to pay, the lender can pursue the other.<\/p>\n Some personal loans do not require a co-borrower, because the income requirement is relatively low.<\/p>\n This personal loan term applies to an individual who agrees to back the primary borrower by using their stronger credit score<\/a> and credit history<\/a>. The co-signer is held responsible if the primary borrower does not fulfill their loan obligations.<\/p>\n Some personal loans do not require a co-signer, even when the applicant has less than pristine credit or a short credit history.<\/p>\n A credit agency, or credit bureau, is a company that records and stores debt-related information on individuals and businesses. They issue credit reports<\/a> when requested.<\/p>\n Equifax, Experian, and TransUnion are the three agencies in the U.S. You can obtain your three free reports from AnnualCreditReport.com to check for errors.<\/a><\/p>\n Your credit history is the record of your experience with debt. The more you demonstrate timely repayment of various types of debts, the more positive your credit history. Those with missed or late payments have a negative credit history. Those who have never taken on debt, may not have a credit history.<\/p>\n A credit report is a document that shows the details of your credit history. It includes any open or closed credit accounts, whether you paid on-time or late, as well as any collection, default, bankruptcy, lien, or judgment against you. You should check the reports from all three credit agencies<\/a> for accuracy.<\/p>\n Each credit reporting agency uses the information in your credit report to assign a numerical rating that indicates your risk level. The higher your credit score, the less risky. Since each credit reporting agency uses their own rating system, you will have three credit scores.<\/p>\n Experian<\/a> and Equifax<\/a> offer a free service for credit scores. However, you must use an independent source such as Credit Karma<\/a> or Credit Sesame<\/a> for your Transunion credit score. If you’re interested in the details on how these agencies calculate your credit scores, you can find it here<\/a>.<\/p>\n Debt consolidation involves combining multiple debts into one personal loan with a single payment. This simplifies your finances and the right loan can lower interest rate too.<\/p>\n Your debt-to-income ratio compares your monthly income to how much you spend each month. Lenders use it to determine how much money you an afford to borrow.<\/p>\n Default is another way of saying you did not meet your loan obligations. It is up to the lender to decide when your loan goes into default, but the issue can affect your credit report and credit score.<\/p>\n This personal loan term is important should you ever encounter financial hardship. Some lenders will defer, or delay your installment loan payments for a time, but the loan will continue to accrue interest on the balance.<\/p>\n A fixed interest rate personal loan has the same rate throughout the loan term. Your monthly payments remain the same, making it easier to budget.<\/p>\n Your gross income is the total amount of income earned before deductions. It includes your salary, tips, commissions, and other in-kind employee benefits.<\/p>\n When you\u2019re applying for a personal loan, pay special attention to this personal loan term. Many lenders choose to perform a hard credit check. This lowers your credit score by up to 10 points and remains on your credit report for up to two years. However, not all personal loan applications involve hard inquiries.<\/p>\n An installment loan is a personal loan with a set repayment period and regular scheduled payments. You\u2019re issued a lump sum and then repay your debt plus interest according to your loan agreement.<\/p>\n Interest is what you pay for using a lender\u2019s money. It is included in the APR<\/a> lenders must reveal to you beforehand. If the lender states they charge simple interest, you are only charged interest on the principal outstanding, which saves you money. Compound interest accumulates on the principal and the interest from the previous month, which costs you more. Find more about the factors that determine personal loan interest rates<\/a> and interest rates in general<\/a>.<\/p>\n A loan agreement, or loan contract, is the document you sign that binds you to lender\u2019s terms. It includes important information such as your loan amount, the annual percentage rate, your payment schedule, fees and penalties, and the repercussions if you do not meet your loan obligations.<\/p>\n If you are late making your loan payment, your lender may charge you a late fee after a certain time. Look for this personal loan term in your loan agreement to determine when this will happen and how much it will cost you. Better yet, pay on time.<\/p>\n This loan term describes the time you have to repay your loan. Lenders may set the term to a year or less if your personal loan is for a relatively small amount. If you\u2019re borrowing a substantial amount, the lender will probably offer you more time to repay and more payment choices so you can align them with your finances.<\/p>\n This is the monthly salary you receive after the deduction of state and federal taxes, child support and wage garnishments, and voluntary deductions such as medical, dental, vision, long term care, critical illness, universal life, and accident insurance, union dues, parking, etc. It is also known as take home pay.<\/p>\n Watch for this personal loan term. Some lenders make it seem this is a normal expense, when it is actually discretionary. The lender charges you a percentage of your loan amount to cover their administrative costs and deducts it from the funds you receive. This fee can range between 1.0% and 10.0% of your loan amount.<\/p>\n Loan terminology can be confusing, which can lead to poor decisions. A payday loan is a short-term, unsecured loan, but not an installment loan<\/a>. You only have weeks to repay, because it is only meant for a temporary financial gap. Your costs are usually higher too, hovering around 400% APR<\/a>, according to the Consumer Financial Protection Bureau.<\/p>\n Pre-approval, or pre-qualification is a process a lender may use to review your finances and your credit. They use a soft credit check<\/a> and if you meet the lender\u2019s requirements, they notify you and provide their installment loan terms. There\u2019s no obligation, and it does not lower your credit score. However, you won\u2019t lock in the terms until you accept them and sign your loan agreement.<\/p>\n This is another personal loan term you should check for before you decide on a lender. Basically, it is an amount the lender charges if you pay more than your scheduled payments. This includes extra payments, lump sums, or even your entire loan. Luckily, some lenders do not charge prepayment penalties.<\/p>\n This a typical personal loan term seen in all loan agreements. It is the amount you agreed to borrow, not including interest.<\/p>\n A repayment schedule lays out when you make your payments over your loan term, based on the amount you\u2019ve borrowed.<\/p>\n A secured loan is one that is backed by an asset. This collateral<\/a> is attached to the loan and if you default on your loan, the lender can seize the asset.<\/p>\n A soft credit check is often part of a pre-approval<\/a> process. The lender does a quick review of your credit to determine whether they will offer you a personal loan. If you\u2019re pre-approved, the lender provides a no-obligation estimate of the costs and terms they\u2019re offering so you can compare them with other lenders.<\/p>\n An unsecured loan does not involve collateral. The lender grants you the personal loan based on their assessment. They can\u2019t seize your personal assets if you default, unless the court issues a judgment against you.<\/p>\n Some installment loans have a variable interest rate, which rises and falls based on a benchmark stated in the loan agreement. The frequency of adjustments depends on the lender and your payment amount rises and falls with these adjustments.<\/p>\n It is easy to see that there is much to consider when choosing a personal loan. However, FlexMoney can make the process much simpler. We\u2019re connected to many reputable online lenders that use a pre-approval process and a soft credit check, making it quick and easy to see whether you qualify. You may also want to read our article on various loan types<\/a> before you decide on a financial product. In some cases, personal loans make good sense<\/a>.<\/p>\n Borrow between $200 and $2,000 through our FlexMoney loans<\/a>, and take 12 months to repay. We don\u2019t charge application or origination fees or pre-payment penalties. You don\u2019t need collateral or a co-signer either.<\/p>\n More importantly, FlexMoney offers easy approval<\/a>. We help many people get a low income installment loan<\/a> or a bad credit installment loan<\/a>. If you earn a steady recurring income paid by direct deposit, try FlexMoney. We make borrowing hassle-free.<\/p>\n If you’re interested in the difference between a personal loan and a line of credit, you can read more about that here<\/a>. We also offer more information regarding online loan jargon here<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":" A personal loan is a big decision and you need information to choose wisely. Nonetheless, that\u2019s hard if you don\u2019t understand personal loan terms. Luckily, we\u2019ve condensed loan terminology into this personal loan glossary to help you. If a term isn\u2019t listed here, ask the lender for clarification before signing your loan agreement. Lack of […]<\/p>\n","protected":false},"author":3,"featured_media":211,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,12,37],"tags":[32,20,52,13],"class_list":["post-210","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-easy-loans","category-installment-loans","category-same-day-personal-loans","tag-fast-missouri-installment-loans","tag-flexmoney-installment-loans","tag-personal-loan-glossary","tag-small-us-installment-loans"],"yoast_head":"\nAmortization<\/h2>\n
Annual Percentage Rate (APR)<\/h2>\n
Application Fee<\/h2>\n
Arrears<\/h2>\n
Automatic Payment<\/h2>\n
Borrower<\/h2>\n
Collateral<\/h2>\n
Co-Borrower<\/h2>\n
Co-Signer<\/h2>\n
Credit Agency or Credit Bureau<\/h2>\n
Credit History<\/h2>\n
Credit Report<\/h2>\n
Credit Score<\/h2>\n
Debt Consolidation<\/h2>\n
Debt-To-Income Ratio (DTI)<\/h2>\n
Default<\/h2>\n
Deferment<\/h2>\n
Fixed Interest Rate<\/h2>\n
Gross Income<\/h2>\n
Hard Credit Check or Inquiry<\/h2>\n
Installment Loan<\/h2>\n
Interest<\/h2>\n
Loan Agreement<\/h2>\n
Late Fee<\/h2>\n
Loan Term<\/h2>\n
Net Income<\/h2>\n
Origination Fee<\/h2>\n
Payday Loan<\/h2>\n
Pre-Approval<\/h2>\n
Prepayment Penalty<\/h2>\n
Principal<\/h2>\n
Repayment Schedule<\/h2>\n
Secured Loan<\/h2>\n
Soft Credit Check or Inquiry<\/h2>\n
Unsecured Loan<\/h2>\n
Variable Interest Rate<\/h2>\n
Bottomline on Personal Loans<\/h2>\n