What are the basics of a loan?

Some of the biggest financial goals in life, such as buying a home or a car, may not happen without the help of a loan. Before jumping into this financial commitment, it is important to understand some basic terminology, so you are not at a disadvantage when applying.

What are some of the main features?

Before you borrow, familiarize yourself with some key terms related to all loan types. They include:

• Principal: The original amount of money borrowed on a loan. An amortized loan is a type of loan with scheduled, periodic payments that are applied to both the loan's principal amount and the interest accrued. An amortized loan payment first pays off the relevant interest expense for the period, after which the remainder of the payment is put toward reducing the principal amount.
• Interest Rate: Along with the principal, you may be required to pay interest. This is the amount the lender is charging you to borrow money and is usually a percentage of the principal loan amount.
• Loan Term: The length of time it will take you to pay back the loan if regular payments are made according to the repayment schedule.

Are there any costs associated?

Before you choose the right loan for you, it is important to understand any costs that may be associated with the loan.

• Annual Percentage Rate: The Annual Percentage Rate (APR) is the annual cost of a loan to a borrower — including fees. The APR is intended to give you more information about what you’re really paying. The APR is expressed as a percentage and includes other charges or fees such as mortgage insurance, most closing costs, discount points, and loan origination fees. The APR not only includes the interest that you will have to pay but may include additional fees that are associated with getting the loan. The higher the APR, the more you will pay over the life of the loan.

Fees may vary depending on loan product. Contact your local branch for more information on any fees associated with applying for a loan.

Additional common loan terms

Before you decide to borrow money, here are some common loan terms that will help you understand your loan. They may include:

• Borrower: That’s you! When you apply and are approved for a loan, you are the borrower.
• Collateral: This is the asset you name to secure your loan. It may include real estate, vehicles, or investments. For instance, when you get an auto loan, the car is the collateral securing the loan. Collateral is required on secured loans, not unsecured.
• Co-borrower: A person is jointly responsible for repayment of the loan with you. For example, if you and your spouse get a mortgage together, you are co-borrowers with both of your names appearing on the loan documents.
• Loan agreement: This is the legal contract between you and the lender. The loan agreement will contain information about the transaction such as the loan amount, the interest rate, and terms.
• Borrower default: This is when a borrower does not pay back the loan as agreed. Loan default may vary by type of debt. To find out when your loan would be in default, contact Adirondack Bank or read the loan disclosures.
• Grace period: This is the time period given to borrowers after the loan’s due date to make payments before a late charge is assessed.

Ready to apply for a loan?

When you are in the market for a loan, choose Adirondack Bank as your local solution for your lending needs. We are here to help you accomplish your goals. We offer a variety of loan options with convenient terms, competitive rates, and local decisions. Visit our lending center or your local branch for full details.

The information in this article was obtained from various sources not associated with Adirondack Bank. While we believe it to be reliable and accurate, we do not warrant the accuracy or reliability of the information. Adirondack Bank is not responsible for, and does not endorse or approve, either implicitly or explicitly, the information provided or the content of any third-party sites that might be hyperlinked from this page. The information is not intended to replace manuals, instructions or information provided by a manufacturer or the advice of a qualified professional, or to affect coverage under any applicable insurance policy. These suggestions are not a complete list of every loss control measure. Adirondack Bank makes no guarantees of results from use of this information.