There are certain terms you will come across when applying for a loan and some of them might be unfamiliar, especially if it is your first time applying for a loan. We’ve compiled some of these terms and explained them as simply as possible.
It refers to the original amount you borrow not including any interest. It is the initial size of a loan before the cost of borrowing is added and it can also mean the amount still owed on a loan.
This is the cost of your loan. It is the amount charged by a lender for using its money. The total interest on a loan amount depends on the principal sum and the length of time over which it is lent or borrowed. However, your interest rates can either be high or low based on risk assessment ( if considered as a low-risk borrower, you will most likely get a lower interest rate).
This is the criteria that have been standardised by a lender to evaluate if a customer is qualified for a loan or not. A quick check is done on your credit history, which mostly determines your eligibility status.
This refers to the process of paying out a loan to a borrower. This is the last stage of procuring a loan, where a lender accepts your request for a loan and process funds. FairMoney disburses loan to a preferred bank account usually under 24hrs.
This is when a borrower fails to repay a loan according to an initial agreement. Defaulting on a loan will reduce your credit score, impact your ability to get subsequent loans, and can also lead to high-interest rates on future loans. A good way to avoid this is to set an auto-debit repayment on your account.
Are there any loans terms you’d like us to explain, state them in the comment section and we will respond.
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