Are you in the process of getting a loan and you've seen several terminologies been used that is difficult for you to understand?
Do you want to know about the different loan terms been used by loan providers and what they imply?
Then this article is for you, we have detailedly explained severally terminologies used in loan agreement and what they mean
It is very necessary to know about any loan terms before taking the loan, to avoid had I known or something similar.
Loan Terms and Their Meaning
1. Principal Amount
This refers to the amount borrowed from the loan company without the addition of the interest rate which must be made along side the principal amount or money loaned to you. For instance if you borrow #10,000 and you are required to pay 13,000 after 30 days, the principal amount refers to the 10,000 loaned to you.
2. Interest Rate
This is also known as the cost of loaning, interest rates is the profit the loan company or provider gets from loaning a certain amount of money to you. Interest rates varies depending on the loan provider and also the repayment terms. Basically, person's considered as low risk borrowers will get a lower interest rate due to the trust the loan provider has for them and their commitment in early repayment of loans.
3. Eligibility
Eligibility refers to the process of accessing the information of the borrower to see if it meets up with loan terms, it is also used to determine the amount of money a person can be allowed to borrow. Eligibility is usually accessed by checking the credit score of the borrower, a borrower with a high credit score gets a higher chance of accessing loan while a low credit score borrower will often be denied loans or given a very small amount of loan.
4. Disbursement
As the name implies, disbursement is the process whereby the borrower will get credited for the loan he applied for. This is the last stage in the process of borrowing and usually occurs in 0 to 24hours. Borrowers are usually asked to submit an account details where the loan will be disbursed to.
5. Loan Default
A loan default usually occurs when a borrower defaults or breaks the stated agreement which was agreed upon while taking the loan. In other words a loan is termed defaulted when a borrower fails to repay a loan at the agreed date which the loaned became due.
This usually leads to increased charges, which may result to an increments in the total due amount as the case may be or may even lead to more serious issues such as your Bank Verification Number (BVN) being reported to Central Bank of Nigeria (CBN) which will result to a reduction in your credit score and greatly impact your finance record negatively.
Conclusion
The above listed and explained loan terms are amongst the most popular ones you would find while trying to get a loan, we believe we were able to explain correctly to your understanding what those terms means and why you should work according to the agreed terms.
0 Comments