When you are looking out for a loan, you have to be prepared to try to make sense of financial lingo. We find terms like "Agreement in Principle" and "Adjustable Rate Mortgages" to "Credit History" and "Equity Release". No matter how you look at it, getting a loan is like getting a whole new education. If you are under the impression that you have a flair for English, just try asking a mortgage salesman for loan advice. By the end of it all, you might just come home feeling like you are absolutely incapable of understanding anything ever again.
However, it really is not all that difficult when you get down to the basics. For instance, "Agreement in Principle" is just a complicated way of referring to the agreement that is made between the lender and the borrower as to the sum of money that will be lent. To a large extent, this amount would depend on aspects like your credit history, the collateral that you are offering, and your current income among other things.
Are you already feeling a little astonished by all this jargon? Let me simplify things a little more for you. Credit history refers to whether or not you have repaid loans that you had taken earlier. If you have been a defaulter on a previous loan, you have a bad credit history. If you have not defaulted, you will be said to have a good credit history. At this point, keep in mind the thought that a bad credit history will haunt you for the rest of your life when it comes to getting loans.
"Collateral" refers to the asset (usually property) that you use as security to obtain a secured loan. An unsecured loan requires no such collateral. If you haven't yet purchased any property, but are wanting to buy some, you will stumble upon all kinds of mortgage terminology like "Adjustable Rate Mortgages". This is distinct from "Fixed Rate Mortgages" where the interest rate is fixed no matter how the market reacts. In an adjustable rate mortgage, the rate may vary according to the market conditions. These days, one can avail of mortgages that have a combination of fixed and adjustable rates.
If you already own a house, but are paying mortgage on it, "Equity Release" might be just what the doctor ordered. Equity means the difference between the value of your home and the mortgage amount that still remains due. Free this equity by trying out an equity loan to take care of some other expenditure.
You would benefit if you familiarized yourself with some financial jargon before you started loan shopping. Make loan hunting a whole lot easier!
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