Browsing a personal loan website, but not sure what to make of it?
When it comes to financial matters such as loans, certain terms can be a little confusing to understand. Here is a personal loan glossary that explains all the jargon that you are likely to encounter in the approval process and loan documents.
- Application fee: Some lenders charge an application fee for the processing and sanction of the loan. You should look for a lender that charges the lowest fee.
- Borrower: A borrower is a person (in this case, you) who applies for the instant personal loan and receives the funds. As the borrower, it is your responsibility to repay the loan in the stipulated time.
- Credit score: A credit score, sometimes referred to as the CIBIL score, is a number that determines your personal loan eligibility. The higher the score, the better rate of interest will be offered to you. You must aim to maintain a score between 750 and 900.
Additional Read: How Can Your CIBIL Score Help You Avail A Personal Loan With Ease?
- Collateral: Sometimes, lenders ask you to sign an asset as security while applying for a loan. If you are unable to repay your instalments, the lender can take over your asset to make up for the failed payment.
- EMI: Equated monthly instalments (EMI) are the repayments that you make to clear your debt within the loan tenure.
- Personal loan EMI calculator: You can use an online personal loan emi calculator to ascertain the value of each instalment for a specific amount and tenure. Lenders offer this feature to make it easier for people to understand their debt liability and make an informed decision.
- Late payment fees: When you apply for a loan, you agree to pay the instalments on a specified date every month. If you fail to make the repayments, the lender can charge you a late payment fee, in addition to your regular instalment amount.
- Interest rate: Personal loan
interest rates are charged by the lender. They are paid over and above the loan
amount. Every loan provider has their own criteria for each applicant, but they
are predominantly decided based on your loan amount, credit history, loan
tenure, etc. Interest rates can be of two types:
- Fixed interest rates: These remain fixed during the entire term of the loan.
- Floating interest rates: These can vary across the term depending on the market conditions.
Additional Read: What is the Difference between Personal Loan Fixed Interest Rates and Floating Interest Rates?
- Tenure: This refers to the period within which you will have to pay back the personal loan.
- Part prepayment: If you find yourself with surplus funds in the future, you can pay back your loan in lump sum payments instead of following the EMI calendar. However, some lenders may charge an additional fee for this.
A personal loan is a relatively straightforward and uncomplicated form of credit that can be used by most people to cover their financial needs. These terms will help you understand the stipulations of your loan agreement better further simplifying the process. It also helps to choose a reliable and trustworthy lender like Tata Capital that offer a personal loan online with minimal documentation and lots of benefits.