loan principles

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.