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Loan 101
Once you decided you need loan, then make sure you're clear on how they work, how they're different, and what you can expect from the application process.
A secured loan has certain form of collateral attached to it. Where in the most common types of secured loans are mortgages and auto loans, where in, the home or car serves as collateral. If you become default on the loan, Then the lender can collect the collateral in its place. Where As unsecured loan has no collateral attached. Where in the most common types of unsecured loans are student loans, personal loans, and credit cards.
Borrowing money is costs money. The interest rate is the cost on borrowing the principal amount of an loan, and most likely the person will focus on first when choosing a lender. However, this percentage which get added up doesn't include additional costs, like broker fees and closing costs on a mortgage. Where the total cost percentage is included in the APR, which stands for the annual percentage rate. So were in the interest rate is a piece of the loan pie, the APR is the entire pie.
Loan amortization is where in your repayments are broken down into equal and regular on monthly instalments over time. These regular payments help to pay down interest as well as the principal cost over the lifespan of the loan. The goal is to have your balance be at zero by the time your loan's lifespan runs out. And where as your ability to pay the monthly instalments is a good indicator of whether or not you can afford a particular loan.
A down payment helps by reducing the amount which has to be borrowed up front. Where in most of the mortgage lenders will require a minimum down payment, typically anywhere between 10 and 25 percent of the purchase price or the Invoice price. But if your down payment is less than 25 percent, you may also be required to obtain private mortgage insurance.
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