Formula for Amortisation: How Loan Math Really Works
Warren Team
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Key terms
- Loan-to-Value Ratio (LTV)The ratio of a loan amount to the appraised value of the property, expressed as a percentage. Lower LTV ratios typically result in better loan terms and may avoid PMI requirements.
- Credit Builder LoanA small loan specifically designed to help people build or rebuild their credit history, where the borrowed money is held in a savings account while you make payments. As you make on-time payments, the lender reports your positive payment history to the credit bureaus. Once the loan is fully paid off, you receive the funds, having both improved your credit and built savings.
- Federal Student LoanA loan funded by the federal government to help students pay for college or career school, offering fixed interest rates and flexible repayment options that are generally more favorable than private loans. Federal student loans include Direct Subsidized, Direct Unsubsidized, and Direct PLUS loans, each with different eligibility requirements and terms. Borrowers may also qualify for income-driven repayment plans and loan forgiveness programs.
- Private Student LoanA loan issued by a bank, credit union, or other private lender to help cover education costs that exceed what federal aid provides. Private student loans typically have variable interest rates, require a credit check, and may need a cosigner for students with limited credit history. They generally lack the flexible repayment options and forgiveness programs available with federal student loans.
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