Financial Terms You Need to Know
As we all know, financial terms and jargon can be confusing and overwhelming. However, understanding these financial words is vital when it comes to applying for a loan. With a working knowledge of financial words, you can better understand the loan application process, the different types of loans available, and the associated terms and conditions. At AgTrust Farm Credit, we believe that understanding financial language is key to successful borrowing, and we’re here to help demystify some commonly used terms.
Loan to Value (LTV): LTV is a ratio used to assess risk when lending. Essentially, it compares the size of the loan you are applying for to the value of the land.
Routing Number: The nine-digit number that identifies your financial institution. Your routing number is located on the bottom left of your check.
Annual Percentage Rate (APR): APR is the yearly interest generated by your loan. It represents the cost of borrowing money.
Advance Rate: Advance rate is the percentage of the collateral value a lender is willing to extend as a loan. This helps a borrower determine the amount of collateral to offer to secure the desired loan amount.
Farm Plan: A farm plan tells the lender your intended use of the property you are borrowing for.
Title Insurance: Title insurance is a policy meant to protect buyers and lenders from damages or financial losses caused by a bad title due to title defects.
Legal Description: A legal description is a written statement that describes the boundaries of a piece of real property. It gives the exact size, shape, location, and boundary lines of a piece of real estate.
By working with a trusted lender like AgTrust Farm Credit, you can be sure that you will receive the support and guidance you need to navigate the financial intricacies of your loan application.