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

When Veterans Should (and Shouldn’t) Use a VA Loan

If you’re a veteran who’s thinking of purchasing a home or refinancing the home you have, you may want to…

Holly Johnson
Jun 21, 2018
Why Are There So Many Student Loans on My Credit Reports?

Regardless of what you studied in college, chances are you never took a course that explained how your student loans…

John Ulzheimer
John Ulzheimer
Jun 14, 2018
Three Ways Student Loan Debt Is Holding Back Home Buyers

Young adults with the American dream of homeownership are increasingly waking up to something else: the reality of the student…

Mia Taylor
Jun 4, 2018
The Surprising Figure That Can Torpedo Your Chances at Getting a Mortgage

Finding a home you can afford is hard enough these days. But even that’s only half the battle: If you’re…

Holly Johnson
May 21, 2018
College Kids Are Paying for Bitcoin and Spring Break With Student Loans, but Tuition Is a Safer Investment

College students are already facing crippling student loan debt upon graduation; maybe that’s why one in five seems to figure…

Jason Notte
Mar 25, 2018
Tips for Finding the Best Mortgage Lenders

It’s easy enough to find a mortgage lender: If you’ve ever filled out personal information on a mortgage company’s website, you…

Diane DiPiero
Mar 16, 2018