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Loan Terms

Listed below is a useful guide to loan terms. It is a list of definitions of loan terms that may or may not be familiar to you.

Acronym for the Australian Bankers' Association.

Process in which interest accumulates on a borrower's loan.

A repayment method in which the amount you borrow is repaid gradually though regular monthly payments of principal and interest over the term of the loan.

Annual Percentage Rate (APR)
The APR shows the cost of a loan expressed as a yearly interest rate, including the interest and other fees associated with the loan.

First step in the official loan process to gather and record information about the potential borrower.

Person who has been approved to receive a loan and is then obligated to repay it.

Adding unpaid accrued interest to the principal balance. Capitalizing interest increases the principal amount of the loan and the total cost of the loan.

Property pledged as security for a loan to ensure repayment of a loan.

Consumer credit code
Parliamentary legislation which governs the relationship between borrowers and lenders.

Credit Agencies/Credit Bureaus
Organizations that collect individual consumer credit information and provide credit reports to potential lenders.

Credit History
History of an individual's debt repayment. For most types of loans, lenders use this information to gauge a potential borrower's ability to repay a loan.

Credit Rating
Grade assigned to denote the net worth and credit standing of an individual or a business.

Credit Report
Record that lists all past and present debts and the timeliness of their repayment and documents an individual's credit history.

Amount owed to another that must be repaid.

Failure to repay a loan according to the terms of the loan.

Failure of a borrower to make a timely payment on a loan.

Fee charged for the use of money.

Interest Rate
The amount of interest charged on a loan, usually expressed as a percentage.

Entity that provides loan funds to the borrower. Depending on the type of loan, the lender may be a bank or other financial institution.

Money borrowed from a lending institution, usually repaid with interest.

Loan Applicant
Party applying to the lender for a loan.

Binding legal document you sign when you get a loan. It lists the conditions under which you're borrowing and the terms under which you agree to pay back the loan (also called a promissory note or a mortgage note).

Periodic (usually monthly) installments paid to a lender to be applied toward repaying your loan.

Loan amount borrowed from a lender, not including interest or additional fees.

Process of paying back borrowed money.

An asset that the lender uses to guarantee that the loan will be repaid.

Time limit within which a loan must be repaid.

Variable Interest Rate
Interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.


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