If you are like a lot, you don’t always understand what people talk about when it comes to loans. Without understanding the basic terminology when it comes to loans, you do not set the right to make educated decisions when it comes to applying for loans. There are hundreds of terms; Below are some of the most important:


Assets can be described as anything that has value. Assets can be all kinds of things from the car to the house. Assets can be used in helping to build credit. For example if you apply for a home loan, you can use your car as an asset, to show that if you default on payment, that you have an asset to fall back like your car.


Capital can be a few complicated terms because it can be used in several different situations to be done with finance. Capital can be described as available assets for use to create further assets; It can also apply to cash in reserves, savings, property, or goods.


Debt is the amount of money or something that is borrowed from someone who is called a debtor. Usually borrowed debt will bring several types of penalty along with returns such as flowers, or services.

Debt consolidation

Debt consolidation replaces many loans with one loan that is usually secured on the property. It can often reduce your monthly interest payments by paying only one loan secured on the property sometimes in the long run. Because loans are secured, interest rates will generally be much lower.


Equity is the difference between the value of a product (eg home) and the amount owed above it.


The obligation refers to the amount of all unpaid debts where the company or individual owes it to the debtor.


The principal is used to describe the amount of money borrowed without including interest or additional costs.


The term refers to the length of the debt agreement. For example if you take a loan for home for 10 years. 10 years will be the term.

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