Every loan process has bits of complexity and detail, even signature and title loans which are generally considered a bit simpler than many other kinds of loans. At Utah Money Center, our brokers are here to help walk you through any of the semantics you may not have been aware of.
Starting out with a basic body of knowledge is always a boon to your chances of finding the best car title loan for your situation. At the top of that pyramid is terminology – knowing the industry terms and keywords is a great way to make sure you can hold your ground in negotiations. Here are some of the simplest loan terms to stay on top of:
These terms refer to the monetary amounts in a loan. The principal is the amount you originally borrowed from a lender, and the interest is amount of extra money it costs you to borrow this money over a period of time. Interest rates are generally determined by a combination of factors, including annual percentage rate (APR).
The agency lending you the money needs something to cover them in case you’re unable to pay back the terms of the loan, and this is collateral. In the case of a car title loan, collateral is the vehicle itself. You aren’t usually actually required to give the car up until the loan is repaid, but you’re entering an agreement where the lender will own your car if you don’t meet the terms.
A lien is the document that makes the collateral the legal property of the lender. Once the terms of the loan have been repaid, the lien ends.
Anytime you break the loan agreement, this is called defaulting. In some cases this just mean being late on a payment or forgetting one, but in some others it also means a full-on stoppage of payment. Default is a very bad word in a loan situation, and if possible, you want to avoid these occasions at all costs.
When you’re nearing the end of a loan, one or two payments might be larger. This is because you’re paying both interest and any remaining balance on the principal amount. You can often avoid balloon payments with proper planning.