Important Loan terminologies you must know

the important terminologies are:-
  • Principal loan amount: The amount of money that the borrower borrows from the lender.
  • Interest rate: The percentage of the principal loan amount that the borrower must pay in interest to the lender.
  • EMI : The fixed monthly payment that the borrower must make to repay the loan over a specified period of time.
  • Tenure: The period of time over which the borrower must repay the loan.
  • Down payment: The upfront payment that the borrower must make towards the purchase price of the item
  • Processing fee: A fee charged by the lender to process the loan application.
  • Disbursement: The release of the loan amount by the lender to the borrower.
  • Foreclosure: The early repayment of the loan in full.
  • Loan-to-value ratio (LTV): The LTV is the ratio of the loan amount to the value of the property.
  • Collateral: Collateral is an asset that the borrower pledges to the lender as security for the loan. If the borrower defaults on the loan, the lender can seize the collateral to recover their losses.
  • Credit score: Lenders use credit scores to assess a borrower's risk of defaulting on the loan.

if I missed any , please let me know and I will add to the list,hope this helps to clear the confusion


Staff member
Adding a couple

Pre- Payment Charges - charges for paying off the loan earlier than expected
No Dues Certificate (NDC) - Important document which you get after your Loan is closed, this document says that all your dues are cleared and you nothing else to the Bank
Sanction Letter - After your Loan is processed, the most important document you get from your Bank mentioning all details of your Loan
Loan Agreement - Detailed document you get in addition to Sanction Letter, has much more details.