Loans
- By Amasch McAndrew
- Published 08/7/2008
- Loan
- Unrated
In general, every physical thing can be lent and could be consider as a Loan on another person. however, in today’s financial word the term ‘loans’ refers to monetary loans obtained to satisfy financial needs. The person or institution providing loans is known as the lender the person obtaining it is known as the borrower.
The process of lending:
The lender gives a certain amount of money to the borrower and the borrower has to pay this amount back in a certain period of time in installments with interest.
Today, acting as a lending channel is one of the main purpose and source of income for financial institutions. In legal terms, loans are defined as contractual promises made by the debtor to pay back an amount of money in exchange for the promise of a creditor to give another sum of money.
There are two major types of loans:
- Secured Loans
In secured loans, the borrower collateralizes some assets such as a car or land against the loans. A mortgage loan is one common example of secured loans in which the house for which the loan is being taken is kept as collateral. Also car financing is another example in which the loan is taken to buy a car.
- Unsecured Loans:
Monetary loans which are not secured against the borrowers assets are known as unsecured loans. Examples of unsecured loans are credit card debts, personal loans, corporate bonds, credit line, bank overdrafts and the like.
The interest rates on these different types of loans are not fixed. They vary from lender to lender or can vary according to the laws of a country.
The process of lending:
The lender gives a certain amount of money to the borrower and the borrower has to pay this amount back in a certain period of time in installments with interest.
Today, acting as a lending channel is one of the main purpose and source of income for financial institutions. In legal terms, loans are defined as contractual promises made by the debtor to pay back an amount of money in exchange for the promise of a creditor to give another sum of money.
There are two major types of loans:
- Secured Loans
In secured loans, the borrower collateralizes some assets such as a car or land against the loans. A mortgage loan is one common example of secured loans in which the house for which the loan is being taken is kept as collateral. Also car financing is another example in which the loan is taken to buy a car.
- Unsecured Loans:
Monetary loans which are not secured against the borrowers assets are known as unsecured loans. Examples of unsecured loans are credit card debts, personal loans, corporate bonds, credit line, bank overdrafts and the like.
The interest rates on these different types of loans are not fixed. They vary from lender to lender or can vary according to the laws of a country.