Loans

What you'll find here

When you think about loans, you might think it's just about borrowing money; and when you're ready, paying it back. While that's true, the details can get a little more complicated than that. Here, we'll break it all down so you can make the most informed choices.

Everything one needs to know, easy to understand and well thought out! I've recently found your blog and so glad I did.

-Valeria

Love it. I was just sitting here feeling a little sorry for myself, staring into a weekend of frugality.

-Roberta

Thanks for the great advice and serious motivation.

-Nikki

Loans 101

Before you apply for a loan, make sure you're clear on how they work, how they're different, and what you can expect from the application process.


Difference between a secured loan and unsecured loan?

A secured loan has some form of collateral attached to it. The most common types of secured loans are mortgages and auto loans, where a home or car serves as collateral. If you default on the loan, the lender can collect the collateral in its place. An unsecured loan has no collateral attached. The most common types of unsecured loans are student loans, personal loans, and credit cards.

Difference between interest rate and APR?

Borrowing money costs money. The interest rate is the cost of borrowing the principal amount of a loan, and most likely what you'll focus on first when choosing a lender. However, this percentage doesn't include additional costs, like broker fees and closing costs on a mortgage. That total cost percentage is included in the APR, which stands for the annual percentage rate. So if the interest rate is a piece of the loan pie, the APR is the entire pie.

What is loan amortization?

Loan amortization is when your repayments are broken down into equal and regular (usually monthly) installments over time. These regular payments help to pay down interest as well as the principal cost over the lifespan of the loan. The goal is to have your balance be at zero by the time your loan's lifespan runs out. And your ability to pay the monthly installments is a good indicator of whether or not you can afford a particular loan.

How does a down payment affect my loan?

A downpayment helps by reducing the amount you'll have to borrow up front. Most mortgage lenders will require a minimum down payment, typically anywhere between 10 and 20 percent of the purchase price. But if your down payment is less than 20 percent, you may also be required to obtain private mortgage insurance.

Latest Loans Articles

Income Share Agreements: A Fairer Way to Pay for College, or a New Debt Trap?

New York University recently made headlines with its bold announcement that it will offer free tuition for all medical students.…

Mia Taylor
Sep 4, 2018
Does It Ever Make Sense to Get a 401(k) Loan?

No matter how much you loathe borrowing money, there are times when it’s hard to avoid loans and long-term debt.…

Holly Johnson
Aug 23, 2018
Best Auto Loans for 2018

When I set out to find the best auto loans, I took interest rates into account along with a few…

Saundra Latham
Saundra Latham
Aug 10, 2018
Best Bad Credit Loans for 2018

Getting a loan with bad credit is possible, but it takes time and diligence to find the right lender.

Saundra Latham
Saundra Latham
Aug 1, 2018
When You Should (and Shouldn’t) Use a Personal Loan

Deciding whether to take out a personal loan is a “personal” decision, but it’s also one that’s rife with risk.…

Holly Johnson
Jul 31, 2018
Do Student Loans Help or Hurt Your Credit Scores?

Preparing for college is hard work. You study diligently for the SAT or ACT. You earn the best grades possible…

John Ulzheimer
John Ulzheimer
Jul 19, 2018