Terms for Loans

Without reading the contract, you should never sign on the dotted line, as everyone knows. It also applies in term of loans. It can be detrimental to your finances, credit and future investments if you sign a loan without knowing the terms and what everything means. Make sure that you know these following terms and how they will apply to you before you sign on the dotted line:



  1. Interest rate

The interest rate is the percentage of your loan that will vary according to the economy and will make a difference in your payments that is added on every month

  1. Fixed Rate

It is an interest rate that stays at the same percentage throughout the entire period of your loan.

  1. Variable Rate

A variable rate usually changes yearly and adjusts according to a specific given range of percentages. It will change according to the economy and the charts that are stating what the rates should be for interest.

  1. Principal

You will be paying on your actual house is the principal. What you will see in the end as your investment is whatever you pay on your principal.

  1. Escrow

Escrow is like a savings account of your loan.  It will accumulate without paying directly into the loan, whatever you put in escrow. You can use it to finish paying off the loan or to invest in another loan at the end of the term

  1. Title

Title states that the property belongs to you and you will be get it to your home after it is officially yours.

  1. Deed

It is often used as a title for a commercial area. It shows that the property is leased to the one who is using it as a business instead of giving ownership

  1. Home Equity

This is a loan or line of credit that you can get for your home.  It will finance up to eight percent of your other loan and get paid back later.  This helps if you want to consolidate loans or invest more into the property.

  1. Appraisal

Appraisal will be made after an inspection of the home is done. It will be an estimated value of what the home is worth.

  1. Equity

The actual amount of the property that you own is called equity. is what is being paid off of your principal amount, most likely.

You will be able to expand on your knowledge and find the exact loan that will fit your needs once you know some of these basic terms. It will help you in making the right decision for the type of loan that you want by knowing these basic definitions.


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