• Personal Loan BYTES FROM OUR KITCHEN

    Personal Loan Glossary

    Annual Percentage Rate: Also referred to as APR, it uses simple interest to compute finance charges on a credit line.

    Application Fee: Any amount that a lender charges to arrange and process the loan.

    Asset: A resource that is owned and controlled by a person or any entity considered to be of value and could be of use in meeting financial requirements.

    Automatic Payment: A facility that can be set up to allow automatic transfer of money from an account for any payment requirements.

    Bankruptcy: The legal status of an individual or entity that is not able to repay their loans.

    Basis points: A measure that equals 0.01% of interest, 1/1000 of 1%, or 0.0001, used to present variations in percentages in a financial product.

    Comparison Rate: A tool that gives you a single percentage after considering factors such as interest rates, fees, and charges. It helps customers compare loans from different financial institutions.

    Collateral (also known as Security): Personal assets that a borrower may pledge as guarantee to receive a loan. This could be property, fixed deposit accounts, etc.

    Credit History: This is a record of all your borrowing and repayment transactions. Lenders will consider this to know if you have repaid your loans in time, which in turn will help them assess your creditworthiness.    

    Credit Score/Rating: A valuation of a person or commercial entity’s reliability to repay a loan, calculated based on their history of borrowing and repayment.

    Credit Report: A report provided by a certified agency presenting an individual’s credit history that financial institutions may use to decide creditworthiness of that person.

    Debt: Amount that an individual or entity is liable to repay for the line of credit that they have taken.

    Debtor: A person or entity that is liable to repay a loan.

    Debt Administration: A process that would allow restructuring of a debt for a debtor who is unable to repay the sum that he or she borrowed.

    Debt Consolidation: Debt consolidation refers to the act of taking a fresh loan, usually at a low interest rate, to repay smaller unsecured loans or debts.

    Debt Review: The process through which debt management professionals assist a debtor to manage the repayment of loans. This could include negotiations with relevant financial institutions to get interest rates lowered and make it easier for the debtor to pay off the loans.

    Default: Default happens when a debtor fails to repay the loan or parts of it in time.

    Downpayment: An initial payment on a loan that the borrower makes.

    Finance Charges: Charges and costs of interest that a borrower would have to pay to get the loan.

    Fixed Interest Rate: The interest rate on a loan that does not fluctuate during its tenure.

    Gross Monthly Income: The sum earned before tax and other deductions are made.

    Index: A measure of economic factors that would influence interest rates in loans with adjustable rates.

    Insolvent: When a debtor does not have enough money to repay his debts he could be declared insolvent. At this stage, his outstanding debts may be paid off by liquidating any assets he owns.

    Interest Rate: The cost of borrowing money represented as a percentage of the total loan amount.

    Line of Credit: A revolving loan where a financial institution decides the maximum amount that a customer will be allowed to borrow on a continuing basis. The customer will be able to access this amount at any point of time as long as it remains within the upper limit set by the lender.

    Loan Agreement: An official document that states the terms and conditions of a loan. This would include the obligations and rights of both the lender and the borrower.

    Loan Amount: The total sum that the borrower receives from the lender as a loan.

    Maximum Loan Amount: This refers to the maximum amount that a borrower will be able to access as per the agreement for a loan.

    Minimum Loan Amount: This refers to the least amount that the borrower must apply for as per the agreement for a loan.

    Monthly Loan Repayment: The amount that the borrower must repay the lender every month.

    Net Monthly Income: The money from earnings that is left after tax and other deductions are made.

    Note (or Promissory Note): A written guarantee to pay a certain amount to someone under the terms and conditions that both parties agree on.

    Personal Loan: A financial product that offers to lend a customer a certain amount. This could be with or without the need for a collateral.

    Prepayment Penalty: If the borrower pays off a loan before the tenure of the loan is complete, the financial institution could charge a fee, known as the Prepayment Penalty.

    Prime Rate: The interest rate at which financial institutions may lend to the customers that they favour, based on their credit score.

    Principal: The sum that is borrowed as a loan. This does not include the interest rates.

    Secured Personal Loan: A personal loan that requires the borrower to pledge assets as collateral.

    Sequestration: The process wherein a debtor is unable to repay his loan and is forced to sell his assets to do so.

    Term of Loan: A timeframe within which the borrowed sum must be repaid.

    Title: A term that refers to the legal ownership of a property.

    Total Loan Repayment: The total amount that the borrower has to repay including the interest rates applicable.

    Underwriting: The process of deciding the risks involved in a certain loan and setting up adequate terms and conditions to cover them.

    Unsecured Personal Loan: A personal loan that a financial institution offers without necessitating the pledge of any collateral.

    Variable Interest Rate: Interest rates pegged to indexes that could vary during the term of a loan.

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