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Understanding Loan Payments

When you take out a loan, you'll typically make fixed monthly payments over a set period. These payments include both principal (the amount you borrowed) and interest (the cost of borrowing).

Key Terms

• Principal: The original amount borrowed
• Interest Rate: The percentage charged on the loan amount annually
• Loan Term: The length of time to repay the loan (in years)
• Monthly Payment: The fixed amount you pay each month

Tips for Better Loan Terms

• Shop around for the best interest rates
• Consider making a larger down payment to reduce the loan amount
• Choose a shorter loan term if you can afford higher monthly payments to save on interest
• Maintain a good credit score to qualify for better rates