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Getting the Hang of Loan Lingo

You will definitely be attacked by financial jargon if you ever go loan shopping. We notice terms like "Agreement in Principle" and "Adjustable Rate Mortgages" to "Credit History" and "Equity Release". Going loan shopping is like getting introduced to a whole new world. If you are certain that you have a flair for English, just try asking a mortgage salesman for loan advice. Once it is all over, you might just come home feeling like you speak in a very different language from that of your mortgage salesman friend.

However, it really is not all that difficult when you look at the basics. For instance, "Agreement in Principle" is just another long-winded name for the agreement that is made between the lender and the borrower as regards the amount of the principle. To a large extent, this amount would be influenced by aspects like your credit history, the collateral that you are offering, and your current income among other things.

Are you already feeling a little overawed by all this jargon? Let me introduce you to some of the basics of financial jargon. Credit history refers to whether or not you have repaid loans that you had taken earlier. If you have been a defaulter on a previous loan, you have a bad credit history. If you have not defaulted, you will be said to have a good credit history. At this point, bear in mind the fact that a bad credit history is a sure-fire way to harm your chances of getting loans later on.

"Collateral" refers to the asset (usually property) that you use as security exploit a secured loan. An unsecured loan requires no such collateral. If you are one of those who have not yet invested in real estate but are thinking of doing so, you will discover all kinds of mortgage terminology like "Adjustable Rate Mortgages". This is dissimilar to "Fixed Rate Mortgages" where the interest rate is fixed no matter what the market conditions are like. In an adjustable rate mortgage, the rate may vary in proportion to the market conditions. These days, one can even get mortgages that have a combination of fixed and adjustable rates.

If you already own a house, but are paying mortgage on it, "Equity Release" could be ideal for you. Equity means the difference between the value of your home and the mortgage amount that continues to be due. Free this equity by getting hold of a home equity loan to help you make the most of your house's value.

Try getting to know some of the common financial jargon before you start going loan shopping. If you are familiar with the terms, choosing the best loan becomes a cakewalk!

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