Chapter 1
Loan Glossary A–Z
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Every important loan term defined in plain English — no jargon, no confusion. Bookmark this chapter and reference it whenever you encounter a term you don't recognize.
AmortizationThe process of gradually paying off a loan through scheduled payments that cover both principal and interest.
APRAnnual Percentage Rate — the true annual cost of a loan including interest AND fees.
Balloon PaymentA large lump-sum payment due at the end of a loan term — common in commercial loans.
Cap RateNet Operating Income ÷ Property Value. Used to evaluate investment property returns.
DSCRDebt Service Coverage Ratio — a property's income divided by its debt payments.
DTIDebt-to-Income ratio — monthly debt payments divided by monthly gross income.
EquityThe portion of a property you actually own — value minus what you still owe.
EscrowA third-party account holding funds for property taxes and insurance.
ForeclosureThe legal process by which a lender takes ownership of a property after the borrower defaults.
LTVLoan-to-Value ratio — loan amount divided by property value. Lower LTV = better terms.
🔗 See the full A–Z glossary at faqloan.com/glossary
🎯 Key Takeaway: Never sign a loan document that contains terms you don't fully understand. This glossary is your safety net.