Many of us are not aware of the financial terminology which is used while we pursue a personal loan. If you know the terms and their meaning you will be able to talk more confidently and will be able to get a better deal on your personal loan.
Given below are some commonly used terms in loan and financial terminology which will help you understand all different dimensions about personal loans:
An assessment of the credit-worthiness of individuals and corporations, based on their borrowing and repayment history.
A basis point is equal to 0.01% interest. For example, 50 basis points is an interest rate of 0.50%.
EMI stands for easy monthly installment and is a great way to pay back the loan. A small payment is made regularly (monthly) and it carries on till a fixed tenure.
The interest rate advertised by institutions, not including fees, discounts and special offers.
Debt consolidation means taking out one loan to combine and repay multiple loans or credit card debts that you may have. This is often done to secure a lower interest rate, secure a fixed interest rate, or for the convenience of repaying only one loan at a time.
When a consumer fails to fulfil obligations to make the necessary repayments on a loan.
A loan feature that enables the borrower to withdraw extra repayments they’ve already paid towards the loan. Usually, this is only allowed if they are far enough ahead on loan payments. This is not available on all loans.
A period of no payments, which the borrower can apply for if they are ahead on their payments.
Any undertaking that promises to pay an amount of funds upon the presentation of a claim or some other defined event. If you have a guarantor co-sign your personal loan with you, then they are required (“guaranteed”) to pay your monthly repayments if you do not make your required repayments (a “default”).
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