Whenever you apply for a loan, whether it is a secured loan or a personal loan, always request a Disclosure Statement. Ask for this in advance so you have a chance to read it carefully. Yes, you need to read all the fine print. If you don’t, you may find out later that you signed a contract with terms you didn’t want. This can be disastrous. Also, you can shop around and compare loans of you have this information in front of you. These are things to look for.

Annual Percentage Rate

Your annual percentage rate (APR) is your interest rate. It will vary depending on your credit score. The higher you score is, the better interest rate you will be able to get.

Finance Charge

The finance charge is the total interest payment over the life of the loan.

Amount Financed

The amount financed it the total amount of money you will walk away with. It is also known as the Principal Amount. Be sure you get a detailed breakdown. It will tell you how much will go toward paying the insurance or other fees and charges.

This money will not go toward paying off your loan. Some of the charges may not be necessary. Ask for details on which items are discretionary.

Payment Schedule

The payment schedule will show you the length of the loan. It will also show if there is a balloon payment (significantly large payment) at the end. You can decide if you want to make fewer but larger payments or if you want to make more payments of a lesser amount.

Credit Insurance

Credit insurance is optional. Don’t let the lender add this on unless you want it. This insurance is usually overpriced and rarely worth the cost.

Prepayment Penalty

A prepayment penalty is an amount you will owe if the loan is paid off early, as it would be if you sold your house, for example. If there is a prepayment penalty, be sure you understand the terms. Better yet, look for another loan without one.

Principal Amount

See Amount Financed.