Important Financial Terms To Remember When Applying For A Loan

Do you want to borrow from banks or financial institutions?

There are some financial jargons that may be quite confusing at first, especially when it comes to loans. Here are some important terms to remember.

Credit Score
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A credit score is a number that reflects your capability to manage debt, which factors in your credit payment history, the amount you've loaned, the type and length of your credit, and any new credit that you've acquired. A higher credit score gives you more chances of being approved for a loan.

​Interest Rate
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When you acquire credit, the interest rate is the amount that is charged by the lending institution on top of the amount you borrow from them. The rate varies depending on the bank and the terms of the loan.

Collateral
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There are risks when lending institutions give out credit, such as borrowers being unable to repay on time. Collateral serves as security for the lenders in such cases. However, not all lenders require collateral from borrowers.

Secured Loan
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When applying for a loan, the bank or lending institution may require collateral, which may come in the form of a car, house, or savings accounts. A loan that requires this is called a secured loan.

Unsecured Loan
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There are other banks that do not require any collateral when acquiring a loan. This is called an unsecured loan and is commonly used to fund education, home improvements, and even weddings.

Loan Tenure

​The loan tenure refers to the length of time that the borrower needs to repay the loan, including the interest. Depending on the type of loan acquired, this could range from months to years.