There is a saying that goes, "People fear what they don't understand." This quote applies to many things in life including money matters and loans, especially when they are presented in financial jargon. Let's break down the most commonly used terms to ease the intimidation from these otherwise simple concepts.
A bank loan is a sum of money that is borrowed, with the condition that it is paid back with interest. The 2 main types of loans are secured and unsecured loans, the main difference being the presence or absence of collateral. Banks offer different types of loans for particular purposes, including auto/car, housing, salary, and personal loans.
This is usually a valuable property of the debtor that is pledged as security for the repayment of a loan. This is automatically forfeited when the debtor is not able to pay back the loan.
Interest may be viewed as the cost for using the bank's money. It is usually expressed as an annual percentage of the principal, or the running amount of the debt. The interest is added to the principal when payments are made.
This is a numerical representation of one's trustworthiness, with regard to money. For example, payments on utility bills and other debts like credit cards can be used to determine one's credit score. The higher the score, the bigger the chance that banks will lend out larger sums of money or offer lower interest rates.
The tenor is the time until a loan is due. An agreement may be for a 5-year tenor, which means the loan needs to be paid back within
This means making incremental payments of the amount borrowed (or principal) plus interest throughout the term of the loan. For amortized loans, a portion of your payment goes to the interest and as your loan matures, a larger portion of your monthly payment goes to your principal balance.
The post-dated check is the most common means of payment for a loan. It is a check that is written and issued by the debtor for a date in the future and may not be encashed or deposited until such time. Debtors use post-dated checks to avoid missing payments on their loans.
We hope that by breaking down these terms, you can navigate bank loans with ease. They're not as intimidating as you first thought, right? There is much to be gained with understanding, and we hope this helps you when you decide to take out a personal loan today.
For any concerns, you may call us at (632) 8995-9999 or send us a message through www.citibank.com.ph.
Citibank, N.A. Philippine Branch is supervised by Bangko Sentral ng Pilipinas with telephone number (632) 8708-7087.