Loan Basics, Interest & APR
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11 Terms
What is a loan?
A loan is borrowed money that must be repaid over time.
Who usually provides loans?
Banks, credit unions, and other lenders.
What is the principal of a loan?
The original amount of money borrowed.
Why do you pay interest on a loan?
Interest is the cost of using someone else's money.
What is a secured loan?
A loan backed by an asset that the lender can seize if repayments aren't made.
What is interest?
The percentage charged on the principal for borrowing money.
What's the difference between fixed and variable interest rates?
Fixed stays the same; variable can change over time and can be risky.
Why are variable rates riskier?
They can increase suddenly, raising repayments—especially risky for long-term loans.
What does APR stand for?
Annual Percentage Rate.
Why is APR more important than the interest rate?
APR includes interest + fees, so it shows the true cost of the loan.
What affects your APR the most?
Your credit score — lower score = higher APR.
Note 
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