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Loans 101


As you settle into 2022, your New Year’s resolutions that seemed like an easy-to-check box might be looking a little more difficult to cross off your list. If you have a financial goal, like building credit or buying a home, it can be even more intimidating to make progress when you’re not familiar with common loan lingo that shows up in your research or loan application.

If you’re feeling stuck, or have always wondered what a term meant but just never got around to looking it up, the small glossary below can help give you the confidence you need to make your financial goals a reality!


Collateral: An asset or property (of yours) that can be used to secure a loan with a lender – and which could be taken from you if you don’t pay back what you owe. It helps lenders ensure they’ll get their money back.

Co-signer: An adult (age 21+) such as a parent, family member, or friend who agrees to pay back a loan if you do not.

Credit Report: A record of a borrower’s debt and payment history.

Credit Score: A number based on an analysis of your credit report that helps lenders decide whether to lend you money, at what rate, and at what limit.

Debt-to-Income Ratio: Debt-to-income ratio (DTI) is the amount of your monthly gross income that goes toward paying debts. DTI is a tool that helps lenders determine how much it would be prudent to lend you given your income and existing debt obligations. To calculate your DTI, divide your total monthly debt by your total monthly income.

Interest: The amount of money you pay to a lender (above the principal sum borrowed) in return for them agreeing to lend you money. This is typically expressed as an annual percentage rate (APR).

Line of Credit or CreditLine: A flexible loan that offers a defined amount of money that you can access as needed and repay immediately or over time.

Loan Balance: The amount of a loan left to be paid.

Principal: The amount borrowed for a loan or line of credit that must be paid back to the lender, not including interest.

Underwriter: The person who reviews your loan for approval.

No matter what your financial goals are for 2022, knowing terms like these set you up for success when you go to a car dealership, start looking for a home, or apply for your first credit card.

Have more questions? Visit to dive deeper into how you can build and maintain your credit. Or if you’re ready to put numbers on paper, check out the various loan calculators at

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