Finance Terms You Need to Know for your First Loan!

Have you been thinking of financing your next dream project? Credit One loans come in handy. However, whether you’re getting a loan for the first time or not, being informed about what you’re doing is the best thing you can do. You’ll appreciate the process of acquiring that vehicle or business loan better.

Without understanding basic loan terms, there are high chance of making uninformed decisions during the loan application and agreement closing. Here are some of the most common loan terms you’ll need to know first. Let’s get into it!

Lender

A lender can be a person or a financial institution like a bank. It’s the institution funding the loan and who you will be indebted to.

Borrower

A borrower is a person or institution that will receive the loan or credit. The borrower must adhere to the signed terms and conditions of the loan. Such terms include the loan repayment duration, interest, and more.

Principal Amount

It is the total amount of money a lender gives the borrower. The principal amount reduces as the borrower continues to pay the loan.

Interest Rate

Your lender will charge you an additional fee expressed as a percentage on top of the loan you get. The additional amount you pay is the interest rate. The interest rate varies from one financier to another.

Collateral

Depending on the loan you apply for, you might need an asset to pledge to the lender as security for your loan. Collateral can be in the form of a car, property, or even investments.

Unsecured Loans

An unsecured loan is a type of credit that doesn’t have collateral. When you take out this type of loan, the lender cannot seize your assets unless the court awards a judgment in their favour.

Maturity Date

The maturity date, also known as the loan term, is the time you’re expected to complete your loan payment. It’s also referred to as the length of the loan.

Annual Percentage Rate (APR)

APR is the total yearly cost of taking out a loan. APR will include the interest rates as well as any other annual charges.

Borrower Default

The term borrower default means that the borrower has not paid back the loan as promised. In such a situation, the loan to be paid is in arrears.

Close Escrow

It is a meeting between the lender or the lender’s agents, seller, and the buyer where the property and funds change hands legally.

Curtailment

It is money the borrower pays to the lender. The purpose of this payment is to lessen the principal balance on loan.

Fixed Interest Rate

When you take out a loan with a fixed interest rate, the interest rate will not change during the loan duration. Since the interest remains constant, it means your monthly payments will not change too.

Loan Limit

It’s the maximum amount of loan that you can get from a lender. The loan limit is dependent on your credit score, income, and reliability.

Credit One Makes Loan Application Easy

At Credit One, we understand different finance terms in NZ can be confusing. That is why we have a knowledgeable customer service team willing to assist and clarify any issue you might have. We don’t want you to make a mistake.

Apply your personal, car, and business finance NZ with us today and enjoy a streamlined experience. The loan approval is fast and tailored just for you. Call us at 0800 300 500 now!