Loan types in plej

plej offers a number of different loan types, giving you flexibility in how you setup your loan.

You are probably already familiar with 2 popular loan types offered by traditional lenders, which are Principal & Interest and Interest Only.

We offer another loan type that you will never see offered by a traditional lender like a Bank: Principal Only, or no interest.

DEFINITIONS

Principal
The initial size of a loan or the amount of money that has been borrowed.

Interest
An amount of money you need to pay for the use of someone else's money.

Interest Rate
An agreed annual percentage which determines how the Interest is calculated.

Term
The amount of time that the loan agreement is made for, at the end of which it is expected that the loan has been fully repaid.

Example: You borrow $50,000 (Principal) at 3% per annum (Interest Rate) for a period of 10 years (Term).

Following are all the different loan types available in plej.

Principal & Interest

This is a common loan type.

It includes an Interest component which is calculated based on the agreed Interest Rate.

For each repayment that is made for this type of loan, it is usual for part of the payment to contribute to paying back the Principal, and part of the payment used to pay back the Interest.

In the screenshot below, taken from our platform, you can see the repayment of $829 includes a Principal component of $793.74 and an Interest component of $35.26.

Principal Only

A special loan type that you won't see offered by a traditional lender.

In this loan type, the Lender has agreed to not charge the Borrower any interest for the use of the money, and simply wants the loan repaid over time.

The borrower still makes repayments, but with no additional cost or interest component.

Example: John borrows $24,000 from his parents for a Term of 2 years (or 24 months). Since there is no interest, the repayment is simply $1,000 per month for 24 months.

Interest Only

Interest Only loans are typically offered by traditional lenders in order to ease the repayment burden in the first few years, and then they convert to a regular Principal & Interest loan.

During the "Interest Only" period, the borrower only pays the Interest component but does not contribute anything towards repaying the loan itself.

At the end of the Term, the borrower must convert their loan to a P&I loan, or be ready to repay the entire loan amount back to the Lender.