13 Borrowing Money At some point, you will likely make a purchase that requires you to take out a loan. Just make sure that you're getting the best interest rate possible—and that you can afford to make all of the payments in full and on time. The application process When people need a loan, they typically go to their bank (or credit union) and complete a loan application. The bank then checks their credit report and/or credit score to determine if they are a good risk. If the bank approves the loan application, they will go over the terms of the loan (interest rate, amount and length of the loan, etc.) with them. If the loan is rejected, the bank should provide a written explanation of why. If the rejection was the result of a credit search, the person requesting the loan might want to check his/her credit report for errors. When people are turned down for a loan or credit, they should view it as a wake-up call—a message telling them to take control of their finances. Terms to know When you apply for a loan, you should be familiar with the following terms: Co-signer – an additional person who signs the loan documents, and agrees to be responsible for the loan if the payments aren't made Default – failure to repay a loan Down payment – the initial amount you must pay when you purchase something on credit Installment loan – a loan with a set number of payments Interest – the amount you're charged for borrowing money Term – the length of the loan Title – a document that shows ownership