Loans 101 (Loan Basics 1/3) review This is a topic that many people are looking for. is a channel providing useful information about learning, life, digital marketing and online courses …. it will help you have an overview and solid multi-faceted knowledge . Today, would like to introduce to you Loans 101 (Loan Basics 1/3) . Following along are instructions in the video below:

“Lucy lucy has been working at corporate co for the past three years since her her very first day on the job lucy has seen her colleagues refinance students loans purchase cars joan and even buy houses emily lucy wants to be like them there s just one problem. All these activities. Require loans and lucy. Just doesn t feel confident handling them.

What should she to do well her first step is simple understand how loans work on their most basic level loans are simply borrowed money lenders such as banks can give borrowers such as lucy a fixed amount of money called principal like 10000. To buy a car. However. The bank isn t giving lucy this money for free in addition to paying back her principal.

They ll require lucy to pay a certain amount of money each month called interest just for using their money in addition. If her loan is secured as many are due to their more attractive interest and approval rates. The bank can seize actually the asset in this case..


Her car. If she fails to repay. So how is this interest calculated. Exactly let s explain through an example let s say lucy s 10000.

Car loan comes with a 5 annual interest rate divide that 5 by 12 months and you get roughly 04. the monthly interest. Rate that s. Means lucy.

Owes the bank 04. Of her outstanding principal each month in interest. While this seems reasonable enough interest rates come with three more complications..


One not all interest rates are fixed. Some called variable interest rates can change over time often quite dramatically. Because of this they can be quite risky especially on long term loans. Two the interest rate of a loan is not the same thing as its apr apr includes both the interest rate either fixed or variable and the fees.

Thus when comparing loans to see. Which is cheaper. Lucy should always use apr not the interest rate. Three aprs.

Are also highly dependent on your credit score. As the lower your score the higher your apr for more details on this be sure check out our next video credit scores and reports 101 . So that s interest rates..


But unfortunately they aren t lucy s only concern. She also must pay back a certain amount of her principal each month this payment combined with interest makes up lucy s total loan payment. Which is the money you pay the bank each month should lucy want to calculate this number herself. All.

She ll need is an online calculator like ours and three numbers. The amount of money borrowed the interest rate and the length of the loan also known as its term this term is a critical number especially when choosing a loan that s because in general the shorter the term of the loan the greater your monthly loan payment this should make sense after all the less time you give yourself to repay the loan. The more you ll have to pay each month to compensate and while this may seem bad shorter term loans can actually be great for two reasons. One they come with inherently lower interest rates and two because their monthly payments are much larger.

The borrower is forced to pay down the principal. Much faster which ultimately means less interest charged over the life of the loan. This fact is so important that we ll repeat..


It the shorter you can make your loan. Either through extra debt. Repayments or a shorter term. The less interest you ll pay in the long run.

Hopefully you and lucy now better understand how loans work be sure to watch our next video. Which covers everything you need to know about credit scores and be sure to check out our website. Where you can find more educational material your free credit score and great loan recommendations. ” .


Thank you for watching all the articles on the topic Loans 101 (Loan Basics 1/3) . All shares of are very good. We hope you are satisfied with the article. For any questions, please leave a comment below. Hopefully you guys support our website even more.

In this video, you ll learn everything you need to know about loans! You ll learn what APR is, how your minimize your interest payments, how to calculate your monthly loan payments, and much more!

Watch the next video:

See our MoneyCoach Loan Recommendations:

More of a text based learner? See the transcript or notes here:

cash, moneycoach, finance, personal finance, money, loans, loan, interest, term, credit score, interest payment, interest rates, interest rate, subprime

Leave a Comment