Here are some key loan terms you might find helpful:
Amortization:
The process of gradually repaying a loan through regular payments over the term of the loan.
Bridging Loan:
A short-term loan that helps finance the purchase of a new property before selling an existing one. These loans usually last from a few weeks to a year and are secured against the properties involved. They are repaid when the existing property sells. Bridging loans are great for quick purchases or investments but require careful planning to ensure repayment on time.
Collateral:
An asset pledged as security for a loan, which can be seized if the borrower defaults.
Credit Score:
A numerical representation of a borrower’s creditworthiness, which influences loan eligibility and terms.
Debt Consolidation:
The process of combining multiple debts into a single loan, often to secure a lower interest rate or more manageable payment terms.
Default:
Failure to repay a loan according to the terms agreed upon.
Equity:
The difference between the market value of an asset and the amount owed on it, often relevant in home loans.
Help/Hecs:
The Higher Education Loan Program (HELP) or Higher Education Contribution Scheme (HECS) refers to government schemes in Australia that allow students to defer tuition payments, which are then repaid through the tax system based on income.
Interest:
The cost of borrowing money, typically expressed as an annual percentage rate (APR).
Loan Term:
The duration over which the loan must be repaid, usually expressed in months or years.
Loan-to-Value Ratio (LVR):
A ratio that compares the amount of the loan to the appraised value of the asset, used to assess risk..
PAYG (Pay As You Go):
A system where tax is withheld from income as it is earned, often used for employees and self-employed individuals.
Principal:
The original amount of money borrowed, excluding interest.
Refinancing:
The process of replacing an existing loan with a new one, often to secure better terms or lower interest rates.
Rental Appraisal:
An assessment of a property’s potential rental income, which can influence loan eligibility and investment decisions.