A loan is a type of debt.The borrower initially receives an amount of money from the lender, which he has to pay back, usually but not always in regular installments. This service is generally provided at a cost, referred to as interest on the debt. A loan is of the annuity type if the amount paid periodically is fixed.
There are two types of loans
1. A secured loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property.
2. Unsecured loans which are monetary loans that are not secured against the borrower's assets. These are available from financial institutions under many different forms and packages like
* Credit card debt
* Personal loans
* Bank overdrafts
* Corporate bonds
The interest rates applicable to these different forms may vary depending on the lender and the borrower which may or may not be regulated by law.
No comments:
Post a Comment