Loan Terms 101
Understanding loan terms means knowing the length of the loan, repayment frequency, and conditions. In subprime lending, short terms often mean higher payments but lower total cost compared to long terms with small payments.
APR vs Interest Rate
The interest rate shows the cost of borrowing principal. APR adds in fees (origination, maintenance, draw fees) so you see the true all-in cost. Two loans with the same interest rate may have very different APRs.
Credit Reporting Basics
Not all lenders report to the credit bureaus. Subprime installment lenders sometimes do, but payday or line-of-credit lenders often don’t. Reporting matters if you want your on-time payments to help your score.
Borrowing Responsibly
Even high-cost loans can be used responsibly if they solve a short-term need and are repaid quickly. Problems arise when rollovers, refinances, or repeated use trap borrowers in long-term cycles of debt.