7 More Terms
The Default simply refers to an inability on the part of the borrower to repay a loan. Default has negative consequences for the borrower’s credit history.
Some loans offer deferred payment features. A deferred payment is a payment made at a later date. A common example of a loan featuring deferred payment is a student loan. Borrowers of student loans usually don’t have to start making payments until they graduate.
Loan commitment generally means the same thing as loan approval. It is an offer on the part of the lender for a loan. If you are given a loan commitment, you have been approved for a loan.
This loan commitment should detail how much you can borrow and what the interest costs will be. Usually, a loan commitment will expire after a certain length of time has passed. You need to follow through on a loan commitment pretty quickly or you may lose the borrowing opportunity.
If you are borrowing, you should be aware of whether your lender charges a prepayment fee. When you pay off a loan early, there should be less interest charged on the loan. This means the lender makes less money. Sometimes, lenders address this possibility with a prepayment fee. You should look for lenders who don’t charge repayment fees. This gives you more control over loan costs once repayment begins.
A secured loan is any loan that involves collateral. Generally, a secured loan is easier to be approved for. However, a lot of consumers don’t have the collateral necessary for secured loans. If you have valuable possessions to use as collateral, you may want to use them to qualify for good loan terms.
An unsecured loan involves no collateral. The borrower qualifies based on his or her credit and income alone. Unsecured loans are best for consumers. They don’t require consumers to risk ownership of valuable possessions. However, unsecured loans usually have stricter credit requirements. This makes them harder to achieve approval for.
Underwriting is a term that refers to the process of laying out terms for loans. The lender uses risk analysis procedures to analyze loan applications and devise loan terms. Underwriting is the key factor behind making decisions on loan applications. If you are not approved for a loan, it is likely because you do not meet the lender’s underwriting terms.