Financial documents and loan agreements are full of terms that can confuse even educated borrowers. Understanding these common terms empowers you to make better borrowing decisions.
The fixed amount you pay every month toward your loan. It includes both principal repayment and interest. EMI remains constant for fixed rate loans but can change for floating rate loans.
The true cost of borrowing expressed as a yearly rate. Unlike the stated interest rate, APR includes processing fees and other charges, giving you a more accurate cost comparison between lenders.
An asset you pledge to secure a loan. If you default, the lender can seize this asset. Home loans use the property as collateral. Gold loans use your jewelry. Personal loans are typically unsecured with no collateral.
Tenure is the total repayment period of your loan. Moratorium is a grace period during which you do not need to make payments, commonly offered on education loans after course completion.
A loan account where payment has been overdue for more than 90 days. Being classified as NPA severely damages your credit score and triggers the loan recovery process.
Foreclosure means paying off the entire remaining loan at once. Prepayment means making additional payments beyond regular EMIs. Both reduce your interest burden but may attract charges from some lenders.
Knowing these terms ensures you understand every document you sign. Never agree to loan terms that contain language you do not fully understand. Ask questions until everything is clear.