Almost every potential borrower has no or little financial education. Everything that we learned is some information from our friends or family members. However, when it is time to take a step towards serious financial decisions, like applying for a car title or personal loan, it is important to understand loan terminology clearly before signing any documents.
Here is the title loan glossary on Star Loans that will help you to make the right choice when it comes for applying for a personal or title loan.
A
APR
Annual percentage rate is the yearly interest that a lender charges you. This determinant is expressed as a percentage and it represents actual cost of cash within the term of a loan.
Application
A written request provided by an applicant, including information about the borrower, his credit history, property and demanded amount of loan.
B
Bad credit
It is a person’s credit history, showing that he failed to pay off credits on time. The lender considers a bad credit history to be a sign of an applicant’s untrustworthiness. A borrower with bad credit has less chances to get a loan with good terms and fees.
Borrower
A borrower is an individual or organization that uses money on credit. This definition is usually applied to the lending of funds.
C
Car Title
It is a legal certificate that establishes ownership of a car. This document is required when an owner sells his vehicle or applies for a car title loan.
Collateral
Collateral is an asset that a lender demands from a borrower to secure the loan. It helps to minimize risks. In case when a borrower fails to repay the loan. A borrower confiscates the collateral to cover his losses.
Creditor
A person or organization that finances a loan.
Credit Score
Credit score is a 3-digit number between 300 and 850 that shows a borrower’s creditworthiness. The higher the score, the better terms and rates a borrower can expect. The score is based on your credit history.
Credit History
A list of borrower’s valid and satisfied loans. It helps a lender to see if a borrower manages to repay his credit on time.
Creditworthiness
Creditworthiness shows the borrower’s ability to repay the loan in full and on time. A lender decides whether to approve you or not through evaluation of your creditworthiness. A lender understands that you are reliable and responsible enough to make payments on the loan as agreed.
I
Interest Rate
Interest Rate is the price a borrower pays for lending money. It influences the total amount you will have to repay. There are two types of rates: fixed and variable.
L
Lien
Lien is an official right of lender against your asset, that is intended to secure a lender from the loan default. If a borrower do not manage to repay the loan, a lender has the right to confiscate the asset.
Loan Amount
A total sum that a borrower agrees to pay. This amount is regulated in the contract.
P
Pre-payment fee
If a borrower decides to pay off the loan earlier, some lenders charge pre-payment fees. This fee is usually outlined in the contract and only certain loan lenders are allowed to charge this fee.
T
Term
It is a duration of a loan in months or years that an applicant agrees to repay the loan.
Summary
Understanding the basics of title and personal loan terminology on Star Loans allows you to choose the best credit option, suitable for your personal financial situation. Choose your lender wisely and it will help you to improve your credit history.