Loan terms come in great numbers and it seems that whoever came up with them tried very hard to be as confusing as possible.  Some of the greatest confusions regarding loans is when it comes to

1. collateral
2. down payments
3. co-signers

Each of these is important and they all have something to do with getting a loan, but do you have any clue about them beyond that?
Collateral is personal property that you use to secure the loan.  That means if you default you give it to the lender. On a car loan the collateral is the car and on a mortgage it is the house but for other loans there might be valuable collateral required.

A down payment is money you put up for the loan at closing.  The down payment is like a very large loan payment made before you even get the loan.  This applies to many loans for houses and often for vehicles as well. If you have stellar credit you can sometimes get away without the need for a downpayment.

A co-signer is someone you know who also signs the loan agreement and agrees to be responsible of the loan if you default. If your credit is less than perfect a co-signer might be required.

All three can help you get a loan approval and reduce the interest rate on the loan.

Going to jail for not paying a loan?  And you thought debtors jails were ancient history!  The truth is that for many loans you can not go to jail for failure to repay.  You can end up in court, but jail time is not a punishment for most debts.

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You may or may not know that when you make a payment towards a loan that not all of that money is paying off the loan.  This is something that is critical to understand.

If you think every payment you make goes towards paying off the loan then you will be very surprised when the loan length ends up two or even three times longer then you had anticipated.

The loan payment you make is actually only partially going towards repaying the actual loan amount.  In fact, most of the time the majority of the loan payment is actually paying interest to the lender. This is why it’s important to shop around for the best rate possible and this is why getting a low interest rate is so important.  The less interest you pay the more is going towards the actual loan and the sooner you will have it paid off.

How do you get the best interest rate?

Shop around! If you have great credit, you’ll have your pick of many lenders. If you are credit report challenges, your interest rate might be higher but a loan can actually help you improve your credit rating very quickly when you make payments on time.

Understanding the breakdown of a loan payment is important and knowledge will save you money!

Selecting a lender is one of the challenges with getting a loan.  Lenders are not all the same, nor do they all offer the same types of loans.  You have to learn about the different types of lenders so you can choose the best lender and get the best terms possible.

Do Your Homework!

Once you have an idea of which lenders will be able to give you the type of loan you want, you have to check each lender out.  You can start by getting quotes from different lenders and looking at their company reputation.

Being equipped with a list of quotes will help you begin to see what you can expect when you start to negotiate the loan.

Knowledge Equals Negotiating Power

Selecting a lender can be a lengthy process.  You do not just want to go to any lender because a better lender may be out there.  Make sure to shop around.   If you have a great credit history your choices are abundant and lenders may offer great incentives to help you choose them over the competition.