If you're new to the loan world, all of the jargon and vocabulary can be overwhelming. There are too many words to learn, that if you don't grasp any of them, you won't be able to find the right loan package for your needs. If you're interested in learning more, here's a list of some of the most popular loan words.

Advance

The payment you get when you borrow money in the form of a loan is referred to as an advance. The larger the loan advance, the more money you intend to borrow. That's considered an advance and you get the money before you have to pay for it.

APR

The Annual Percentage Rate, or APR, is the amount of interest you'll pay for your loan. This figure is expressed as a percentage that corresponds to the average amount you'll be paid for the year. Since APR is a common calculation for all loans, it is one of the most important aspects for comparing them. The debt interest would be cheaper if the APR is better.

Credit scoring

Credit rating is a tool used by lenders to decide loan eligibility. They inquire about your earnings and financial status through a series of questions. Each answer you have is graded, and the higher your score, the more likely you are to be approved for a loan. If your score is low, you will be turned down for the loan you want.

Secured loan

A secured loan is one that has some kind of collateral backing it up. Collateral is a high-value asset that you use to secure a loan such that if you default on the loans, the lender will seize the item and collect the money owed to them. The collateral for secured loans is either your house or another piece of land. Secured loans have better interest rates than unsecured loans, but if you don't make the payments on time, you risk losing your house.

Unsecured loan

A secured loan requires collateral, while an unsecured loan does not. Instead of collateral, your credit score and earnings are given greater weight. Since the lender's burden is higher, interest rates appear to be higher. However, they pose less of a burden to the borrower and are usually easier to obtain than a secured loan.

The debt word is the amount of time you have committed to repay the loan. During this time, you can repay the loan in monthly installments before the loan and interest are fully paid off. Personal loans typically have terms of 1 to 10 years, whereas home loans typically have terms of 15 to 25 years. The longer the loan period, the lower your annual premiums will be, but the more debt you'll have to pay over time.