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The terms of the loan area

Here is an overview and explanation of the basic terms from the loan area and finances.


Creditworthiness is a term which indicates if you are able to repay a loan. A bank or a non-bank company examines your creditworthiness – most often by information about your provable income – and according to this the company decides if the loan is approved or which amount of money is lent. Simply put, the more you earn, the better is your creditworthiness. Creditworthiness has also an impact on the interest rate – people with lower creditworthiness obtain a higher interest rate because of their riskiness for a bank or a non-bank company.

Credit Bureau

Credit Bureau is a database of people who have ever had a problem with repaying their loans. If you have a Credit Bureau record you will probably have a problem with getting a loan from banks. You will also have a problem to get a loan from some of non-bank companies.

Lien (pledge)

A pledge is a property that you give as a consideration deposit for borrowed money. If a loan is not timely and properly paid, you run the risk that a person who loaned you money will sell this pledge to get the money back. A pledge is typical for mortgage loans, but we can find it also at some personal loans.

Online application

Online application is an electronic form on the website of a bank (or non-bank company) through which you can apply for a loan. Usually in the online application you fill in: 1) the amount of money that you want to borrow 2) the required loan maturity. Based on these two values the webpage counts the amount of monthly instalment.

In the online application you also typically enter your personal information – name, address, monthly salary etc. After completing the application and clicking on “Send” button you will be contacted by an operator of the loan to arrange further details. The operator will arrange with you also the way and time when / how you will get the money. The online application is a modern, simple and comfortable way how to apply for a loan.

Interest rate

The interest or the interest rate is a percentage that expresses how much from the borrowed amount you have to pay extra. Unless otherwise stated, the interest rate is expressed as a percentage per year. So if you borrow 100 000 for one year at an interest of 10 % that means that you must return 110 000 after one year. Beware – the majority of loans also includes various fees and other charges so you usually pay more. The sum of these amounts is expressed by APR.


The APR means the annual percentage rate of charge. It is a percentage of the amount that the applicant pays extra for the loan per year. It also expresses how much the loan will cost including all interest rates and fees. APR is presented as a percentage, but it gives you better and more precise information about the final amount that you have to pay back. The higher the APR the more expensive the loan. When arranging a loan, be always informed about the value of the APR. Some loans have a lower interest rate, but a very high APR, so they are not favorable.

Consolidation of loans

You can use the consolidation of loans if you have multiple loans and you want to merge them into one loan. Your existing loans are then paid back by the bank (or the non-bank company) that arranges the consolidation of loans. Finally you have only one loan and pay only one payment per month.

Creditor, debtor

A creditor is a person or company that loaned money to somebody (generally it may not be just loan of money). The person who borrowed money is called a debtor.

Guarantee, guarantor

Some companies require the guarantee for a loan. It can be a guarantee by a property (house, car) or through a guarantor. A guarantor is a person who guarantees your loan by his/her signature. This means that if you cannot pay for the loan for any reason, the bank or non-bank company will demand the guarantor to pay the loan installments.

The loan agreement

The loan agreement is a document in which the creditor and the debtor agree to the terms and conditions of the loan – the borrowed amount of money, interest rate, fees, loan maturity etc. The loan agreement should always be in writing and should be signed by both parties.

The promissory note

The promissory note is a financial instrument that, by law, must contain exactly the information that indicates who is a creditor, who is a debtor, how much is the borrowed amount, when this amount will be repaid and other mandatory information. The promissory note is one of the oldest financial instruments used in trade. Typically it is used as a mean to get a quick loan.

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Loans – what to be aware of

Within the loan market we can meet many inconveniences and complications. How to avoid them you can learn here.

Principles for loans
APR - what is the APR

Terms from loan market

Credit Bureau
Online application
Consolidation of loans
More terms

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