interest
rates
An interest
rate is the amount charged for a loan.
It is usually expressed as a percentage of the loan
amount that is charged on an annual basis. Because lenders
often calculate interest
rates differently, statutory
regulations set out the calculation for the Annual Percentage
Rate of charge (APR).
Annual Percentage Rate (APR)
The APR is the true rate of interest charged on
a loan taking into account the total cost of interest
and other charges (e.g. broker's fees / legal fees).
The APR is intended to give consumers a
level playing field to compare mortgages against each
other.
Collateral
Assets pledged as security for a loan. In the event
that a borrower defaults on the terms of a loan, the
collateral may be sold, with the proceeds used to satisfy
any remaining obligations. If this is a house,
business or building the property could be repossessed
by the lender in order that the can sell the security.
Any amount received from the sale over and above the
loan outstanding together with the lender's charges
is refunded to the borrower(s).
Early Repayment Penalties
Some lenders levy penalties if you choose to repay
the loan before its final maturity date. You should
carefully investigate these charges if you think that
you might want to pay the loan back early.
repayment
schedules
The repayment
schedule on a loan stipulates the
length of time over which the loan will be repaid and
frequency of the payments. Together with the interest
rate, this information determines the size of the loan
repayments.
Protection Insurance
Protection Insurance is an insurance policy that
protects the borrower(s) in the event of accident, sickness,
disability or in the most severe cases death. In the
event of the policyholder becomes financially unable
to maintain repayments because of illness, death, redundancy,
or any other specified cause the mortgage is . Most
lenders offer credit insurance on their loans
and include the premiums on the insurance as part of
the monthly repayments on the loan. Credit insurance
is not included in the calculation of APR so a loan
with or without credit insurance would have the same
APR but different monthly repayments. Most lenders would
like to see the mortgage protected with life insurance
so that the mortgage is paid off upon the death of the
borrower. This will protect both the bank and any dependants
or partners involved. NBCF recommend life protection
on all our business loans.
Secured Loan
A loan with assets (usually, a business, freehold
commercial property or home equity) pledged as collateral.
The value of the collateral mitigates the lenders risk.
Unsecured Loan
A loan without any collateral which depends on the
credit history and financial position of the borrower. |
