Subscribing to a loan without understanding the paper work involved in the entire process can result in many implications thus it advised that you seek guidance or assistance from an expert regarding the entire loan process.
A loan is an agreement involving two people, a borrower and a lender, whereby the borrower gets an amount of money (principal) that he is compelled to pay back at an agreed period. Thousands of loans have been invented since its creation. Below is a category of loans:
- Pay back a fixed amount periodically, until it matures.
- Pay back everything in the end
- Pay back a fixed amount (the face value for bond) in the end
Below is a list of loan calculators that will address these three categories. We also have specialized mortgage calculator, auto loan calculator, and lease calculator.
An interest rate is the fraction of money paid by a borrower to the lender for the use of money. For most loans, the interest is added to the principal such that the interest that has been added also produces interest. Usually loan interest was presented in APR, which is the interest rate compounded monthly. The usual rate published by banks or APY is the interest rate compounded annually.
Loan Basics for Consumers
Consumers normally look for loans out of financial need, or because they want to attain something say car, a vacation, and an extension to the home. Such loans are quite different from mortgages that finance house purchases.
What characterizes most consumers lending is that it is intended to be relatively short-term. It rarely extends for more than ten years. It may take many different forms: credit card purchases are a type of consumer loan, even if the consumer pays the purchase back at the end of the month. Short-term loans to help cover bill payments, or even the so-called ‘pay check’ loans made just to cover a consumer’s salary payment are all forms of consumer lending.
Worth mentioning is that there are two basic kinds of consumer loans namely secured and unsecured.
A secured loan means that the consumer has to attach property in exchange for the money. A consumer might go to a bank, and propose a valuable coin collection up as collateral for a secured loan that permits them to buy a small boat that you wanted. You can alternatively sell your coin collection to get the money, but then you wouldn’t have it any longer. By putting it up as collateral, you get to keep it so long as you pay the instalments on the loan. Of course, you pay interest on the loan as well.
When you take out an unsecured loan, you simply sign contract that compels you to pay back the loan. There is no security, no property that belongs to you to guarantee repayment. You can obtain a personal loan that is unsecured, but there are others that we easily obtain like credit cards and overdrafts. It is quite tricky to get a personal loan on an unsecured basis. One must have an excellent credit rating to be eligible, and, often, banks will only consider established clients for such loans.