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Women covering the loan basics Loans 101

Are you new to the world of borrowing and loans? Even if the answer is no, you may learn something from this article as we cover all of the borrowing basics.

What are secured and unsecured loans?

Secured loans are ones that are protected by an asset. Whatever is being purchased with the lended money can be used as collateral by the lender. This means that they typically hold the deed or title to this asset until the borrowed amount is paid in full. This gives financial institutions a sense of security that the balance will be repaid.

Unsecured loans tend to be more risky for the lender because there is no collateral (Car, House, Boat, Condo etc.)  to recover in a case of default (failure to repay the loan). This is why the interest rates tend to be higher. Borrowers are typically evaluated for these loans based on their credit reports, credit scores, employment history, disposable income, and many other factors.

What are the different categories of loans?

There is a wide range of possibilities for borrowing reasons. Some of these include personal loans, student and auto loans, and debt consolidation and mortgages. For an expansive list of these loan types, visit https://www.debt.org/credit/loans/.

First, what is an interest rate?

An interest rate is the amount of money a lender charges a borrower for use of the assets in question. These are typically expressed in the form of a percentage of the initial loan amount and are paid back over the periods of repayment. Borrowers are expected to repay the full principal sum (initial amount) plus interest over a designated period of time.

When looking to borrow, interest rates are a pivotal determining factor. Therefore, it is essential to be familiar with the different types of rates. A fixed interest rate is one that will remain the same over the entire loan term, despite how market interest rates behave. This will result in your monthly payments being the same over the entire period.

A variable interest rate is one that varies as the market changes and is charged on the outstanding balance. Your payments will also vary as a result of this.

An APR, or Annual Percentage Rate, describes the interest paid on a loan over a yearly period as opposed to a monthly fee or rate. This is expressed as a percentage and includes any additional fees or costs that are included in the borrowing transaction. The APR ranges from 5.99% to 35.89%. APR differs from a standard interest rate because it includes these fees and costs on top of the established rate. Present in the lender’s terms and conditions, these include costs like origination fees which are charged when establishing an account with a bank or lender. This allows borrowers to get a better understanding of what the total cost is.

What is a term?

The term is the amount of time that you will be repaying the amount in question, also known as the loan period. Term lengths are an important aspect to consider when borrowing. Short terms are typically repaid within a few months to a year. Long terms can be repaid for up to 60 months and beyond. The term length can affect how much a borrower pays because interest rates typically rise with the length of the term. The longer you take to repay the amount, the more interest you will have paid in the end.

What is the range of possible loan amounts?

These amounts can vary based on the type of loan you are searching for. Typically, personal loans ($1,000-$25,000) come in smaller amounts than mortgages. They can also vary based on the qualifications of the borrower.

To learn more about the borrowing basics and further explore your newfound knowledge, visit marinerfinance.com.

Go online or visit a branch to apply for a loan today.

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Personal Finance Company, LLC, NMLS No. 123861 (www.nmlsconsumeraccess.com).
8211 Town Center Drive, Nottingham, MD 21236. Telephone Number 877-310-2373.

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Personal loans offered by Personal Finance Company, LLC are not available in all states. Loan terms are not guaranteed, and APR’s and terms vary based upon state laws and regulations but the APR will not exceed 35.99%. Various factors are taken into consideration when determining loan eligibility, which include, but are not limited to, credit history, loan amount, loan term, income, and debt. Loan closing is contingent upon submission of all required documentation and agreement to all terms and conditions of the loan agreement.

As an example, with an amount financed of $5,000.00 the borrower receives $5,000.00 at an APR of 29.63% and an interest rate of 28.94% which includes a finance charge of $3590.56. Under these terms, the borrower would make 48 monthly payments of $178.97, for a total of payments of $8,590.56. The amount financed may not be the net proceeds paid if charges other than interest are included in the loan.

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