When you are applying for a payday loan, it is extremely important that you know and also understand all of the different terminology that is involved with a loan. If you are unsure of the different terminology, you could quickly find yourself in over your head and facing some extreme problems. However, it is also advised that you look up any phrases that you do not know to ensure that you make the correct decision and also ensure that you are fully aware of what your rights as well as responsibilities really are.
Borrower – During the payday loan application process this is yourself, you are considered the borrower. However, unlike a traditional loan that can have numerous borrowers, a payday loan only has a single borrower. While traditional loans can have a borrower and a co-borrower a payday loan involving only a single borrower makes just the person applying for the loan responsible for the obligation.
Lender – This is the company that you are working with for the payday loan. This could be either a company in your local area or it could be a company that is located on the internet. Regardless of where the lender is located, there will typically be only a single lender for the loan.
Interest Rate – This is also called the APR or Annual Percentage Rate. This is the amount that you are charged for the loan. The longer the loan is out the more you will pay in interest.
Principal – This is the actual amount of money that is borrowed. This will not include any interest charges, or service charges. The principal amount is the actual amount of money that you personally receive as funds from the loan.
Rollover – This is a term that is used to describe renewing the loan. If you are interested in simply paying the interest not actually paying the entire loan off when it is due then you are rolling over the loan.
As you can see there are several key terms that are very important to not only know, but also to understand. Because of the confusion and at times complicating manner that can surround payday loans it is extremely important to fully understand what you are doing in order to actually make wise financial decisions. If you are ever working with a payday lender that is using terms that you do not understand it is very important that you speak to them to find out exactly what they are saying.
If you are ever unsure what you are getting yourself into then it is absolutely critical to do the necessary research. Understanding a payday loan and all of the terminology will make it much easier for you to always ensure that you are proceeding along the correct financial path. Typically speaking if you are ever completely confused about what is going on you should answer all of your questions fully before finishing the loan. It is never a wise idea to obtain a payday loan if you are confused about any of the terms that are being used. This could find you quickly facing an extreme problem that is not easy to solve.