Understanding loan principles
• Credit – optional use of someone else’s money with your promise to repay at a later date.
• Alone with credit comes interest – that’s how the bank makes its money.
The cost of the loan is determined by
• The amount of the loan.
• The length of the loan.
• The interest rate.
General term loans
• APR – annual percentage rate.
• TILA – truth in lending act.
• Collateral – something of value that can be taken if the loan is not rapid.
• Co signer – an adult who will assume legal responsibility for the loan if you fail to repay.
