Every individual has their own desired financial goals and means to achieve them. For some, it may be to buy their first-ever car or house with a loan, while for others, it might be to pay for a big expense through a manageable monthly payment. One such credit you should know about is personal loans. A personal loan can help you in the consolidation of higher-interest debts. Apart from this, you can also make a bigger purchase through a personal loan. Thus, personal loan benefits are more than you can imagine. To know everything about personal loans, keep reading ahead.
What is a personal loan?
To apply for a personal loan, one must borrow money from a financial institution such as a bank or credit union. In the case of a mortgage, you will get funds that must be used to pay for the house. Apart from that, you will get an auto loan to purchase a car. However, in the case of personal loans, you can use them for multiple purposes. A personal loan can be used for various purposes – from paying education fees or medical fees to making a new purchase or consolidating debt. Repaying a personal loan differs from the debt repayment of credit cards. Through a personal loan, you will pay fixed-amount instalments for a specific period until the debt is completely repaid.
Things can get complicated if you are unaware of the terms associated with personal loans. Thus, when opting for a personal loan, you should be aware of the following terminologies:
This is the amount of money you have borrowed for a personal loan. For example, if you borrowed $20,000, the principal amount is $20,000. The lender will charge you an interest rate based on the amount of the principal. The principal amount keeps decreasing as you continue to repay the loan.
When you borrow money for a personal loan, you are supposed to repay the amount borrowed along with interest. The interest is the lender’s charge which they put for allowing you to use their money. Thus, you will be paying the interest every month along with the portion of the monthly payment. The interest will usually be depicted as a percentage.
The number of months required to repay the loan is called the term. Once the lender has accepted your loan application, they will let you know about the interest rate and the term provided.
During the term, you must pay a monthly payment to the lender. Through this, you can reduce the principal amount you owe along with the part of the total interest you will owe throughout the loan.
To know all the related terminologies in detail, get in touch with FinanceCorp today. Our professionals will understand all your needs and requirements and provide you with optimum financial solutions. Getting involved in a financial situation can be overwhelming and stressful. If you are searching for a refinance housing loan or mortgage broker in Perth, contact us.