Understanding Loan Terms: What's an APR? What's Amortization?
When you’re applying for a business loan, it can feel like you need a translator just to understand the terms. APR? Amortization? Don’t worry — these aren’t just fancy words. They’re tools that help you compare, plan, and borrow wisely. Let’s break it down in plain English.
What is APR?
APR stands for Annual Percentage Rate. It tells you how much your loan will actually cost over one year, including:
– The interest rate
– Fees (like origination or servicing costs)
📊 Example: If you borrow $10,000 with a 10% interest rate and $500 in origination fees, your APR will be slightly higher than 10%.
Why It Matters: APR lets you compare loans fairly. One lender might offer 9% interest with high fees, while another offers 10% with no fees — APR tells you which is truly more affordable.
What is Amortization?
Amortization is how your loan gets paid down over time. Each payment includes:
– Interest
– Principal (your actual loan balance)
Early on, most of your payment goes toward interest. Later, more goes toward principal.
💡 Why It Matters: Understanding amortization helps you see how much you owe, how much you’re paying in interest, and what happens if you repay early. Ask your lender for an amortization schedule — it’s like a roadmap for your loan.
How Mission-Driven Lenders Help you Understand This
At a mission-driven lender like us, we walk you through every part of the loan — not just the paperwork.
We’ll explain:
– What your APR actually includes
– How your payments are structured
– What flexible options might be available based on your story and goals
We want you to feel confident, not confused.
When you know what APR and amortization really mean, you borrow smarter. Our goal is to empower you — not just approve your loan.
