In finance, a loan is a debt, as evidenced by the written designation, which indicates, inter alia, the amount of the loan (loan body), interest rate and maturity. A loan involves the distribution of assets over a period of time between the lender and the borrower.
With a loan, the borrower initially receives and borrows a sum of money from the lender, and is obliged to pay and repay the same amount to the lender after some time. As a rule, money is paid in regular payments, or repaid in installments; with annuity, each payment is the same amount.
A loan, as a rule, has its own value, it is called interest on the amount of debt, which is the earnings of the lender and makes it possible to participate in lending. From the legal point of view of the loan, all obligations and restrictions are respected by the agreement, which also holds the borrower under additional restrictions. Although these restrictions apply to a cash loan and virtually any tangible object, it can also be described as part of a contract.
Acting as a lender is the main role for financial institutions. Other financial institutions issue other debt contracts, such as bonds.
A secured loan is a loan in which a borrower provides some property (for example, a car or real estate) as collateral.
Mortgage loan is a common type of debt instrument, the funds of which are used by many individuals to purchase real estate. A banking financial institution, as a loan security, has ownership rights to housing until all mortgage obligations are paid in full. If the borrower has not fulfilled the loan obligations, the bank has the full legal right to regain the house and other real estate, as well as sell it in order to compensate for the lost amounts.
In some cases, a loan obtained for the purchase of a new, as well as a used vehicle, the pledge may be the car itself, just as in a mortgage loan the pledge is housing. The duration of a car loan is much shorter than the useful life of the car. There are two types of auto loans, direct and indirect. The concept of direct auto loan is a loan if the Bank gives money directly to the consumer. An indirect auto loan is when a dealer car acts as a kind of intermediary between a bank / financial institution and a consumer.
Unsecured loans are cash loans that are not supported by the assets of the borrower. These funds may be available from financial institutions under various paths or marketing packages:
credit card debt
loans or lines of credit;
Interest rates applied to various forms of lending vary depending on the borrower. Interest rates on unsecured loans, as a rule, are always higher than on unsecured loans, since an unsecured lender has little chance of repayment in case of default of the borrower. An unsecured creditor in the court levies a fine for violation of the contract, and then enforces the court decision against the borrower, as well as the right to use the borrower’s assets as a means of repaying the debt (that is, those that are not yet pledged by other creditors ) Therefore, higher interest rates reflect the additional risk that, in the event of insolvency (bankruptcy), the debt may be hopeless.
Making a loan: take a cash loan