Loan, in simple terms, is a lending of money. This can be done by and for individuals, organizations et.al, vice versa.
One term that is always associated with loan is debt. Debt is what the borrower of money incurs, which covers the principal amount borrowed plus the interest.
Who can loan?
An individual person can apply for a loan, as well as a business.
When a debtor is an individual person, it is called a “personal loan.” Examples of this type of loan are credit cards, car loans, mortgage loans and others. Under personal loan, one can pay for it for a longer term, but along with this, interest to be paid increases.
On the other hand, when the debtor is a business, it is called a “commercial loan.” This includes corporate bonds as well as mortgages. Credits for this type of loan are based on rating, not score.
Where can you loan?
Personal and commercial loans can be applied for in banks and credit card companies. These financial institutions offer services for the necessary financial processes one should undergo in order to be provided with loan.
What are the terms pertaining to loan?
• Promissory note –This is an evidence for the debt.
Specified in this document are the:
– principal amount borrowed
– interest rate to be charged
– date for the schedule of repayment
• Incentive – This is what the lender can gain from the interest acquired from the transaction of loans. This is what also can persuade him into lending the money to be borrowed.
• Contract –This states the obligations and restrictions as agreed by the debtor and the lender.
Loans are a great deal of help for people and businesses, especially in organizing and planning for their finances so all goes smoothly and troubles can be prevented, or responded to immediately when needed. Everyone just have to remember that each loan entails a responsibility to pay for the borrowed money in time, and in properly agreed terms.