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.

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

For-Profit Colleges Aren’t Worth the Price

As someone who keeps a close eye on trends within higher education and writes about them often, I was saddened…

Holly Johnson
Dec 28, 2015
Why I Sometimes Regret Choosing Harvard over Community College

Back in 2008, I was a junior at Harvard University. It was around 10 p.m., and I was heading back…

Drew Housman
Drew Housman
Nov 19, 2015
How Bank ‘Buffers’ Can Make or Break Your Mortgage Application

By Peter Miller If you’ve got your mortgage application figured down to the penny, you may want to haul out…

The Simple Dollar Staff
The Simple Dollar Staff
Jul 20, 2015