Things to Know About Bank Loans

by Kristi Waterworth, Demand Media Google
    Banks provide a wide range of financial services to their patrons.

    Banks provide a wide range of financial services to their patrons.

    Banks provide the money to finance people's dreams, whether the dream is a new car, a first home or even a line of credit for a vacation. Since lending has many diverse guidelines, developed by both government entities and the banks themselves, many different questions arise during the lending process concerning procedures and policies.

    Does the Commitment Letter From the Bank Lock in the Terms of a Loan?

    A commitment letter specifies the terms of the loan the bank has approved, but it does not lock in the terms until you sign and return it. Your commitment letter must include the loan amount, the repayment term, the interest rate, the APR and the monthly charges associated with the loan. You may also be required to pay at least part of your origination fees when you lock in your loan terms.

    How Much Will a Bank Loan on a Car?

    Banks have individual underwriting guidelines on car loans, but as a general rule many will loan 100 percent of the cost of a new vehicle plus taxes, titles and fees. Loans on older cars are based on their value as determined by the Kelley Blue Book or the National Automobile Dealers Association.

    How Much Does a Bank Want in a Bank Account to Get a Loan for a House?

    The term "cash reserves" refers to the money that's left in your bank after your closing costs and other out-of-pocket expenses related to your home purchase are paid on the day you close escrow. Although some loan programs require that your cash reserves equal two to six months of your new home's combined payment, insurance, taxes and interest, mortgages insured through the Federal Housing Administration do not generally require any cash reserves.

    Does Paying Interest on a Bank Loan Hurt You at Tax Time?

    Paying interest on a loan does not hurt you at tax time. In fact, interest paid on a loan often provides you with tax deductions, depending on the nature of the loan. Interest on investment property mortgages and interest for both primary and secondary personal residences can be deducted on Form 1040 Schedule A. You can even deduct student loan interest directly on your Form 1040 or Form 1040A.

    How Many Years Will a Bank Go on a Secured Loan?

    The term for secured loans varies based on your bank's underwriting guidelines and the type of security you provide. A large loan secured by a certificate of deposit might have a repayment term as long as 10 years, with repayment required before the CD matures. Other loans, such as those secured by funds in your savings or checking account, may only have a term of eight years.

    About the Author

    Kristi Waterworth started her writing career in 1995 as a journalist for a local newspaper. She has also worked as a realtor/contractor and operated a dairy goat farm and seasonal greenhouse specializing in heirloom vegetables. Waterworth received a Bachelor of Arts in American history from Columbia College.

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