Understanding a Home Loan

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Loans are an important part of the way people purchase things with high value. Cars, homes, apartments, tuition, and more are very difficult to pay all by oneself unless you’re independently wealthy. That’s where loans come into play. This video explains the basics loans so that you can understand all financial avenues available.

Loans are borrowed money. Banks and credit unions can give a borrower a fixed amount of money, called a principal. The principal will be used to buy things like a car, home, or any other expensive need. You can even get a loan to start a business.

The borrower will need to pay back the loan to the bank in addition to an interest payment. The interest payment is a percentage of the loan that is tacked onto the repayment structure. It’s the charge for using the bank’s money.

If the loan is secured and is not repaid with interest in a timely manner, the bank or credit union can seize the asset the loan was used to pay for. For example, if someone buys a home with a loan and can’t afford to pay it back, they will likely end up forfeiting the house.

For more information, check out the video above.

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