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Legally, a loan is a contractual promise between two parties where one party, the creditor, agrees to provide a sum of money to a debtor, who promises to return the money to the creditor either in lump sum or in parts over a fixed period in time. Generally the term loan is used to imply monetary loans, although, in practice, any material object might be lent.
Basically, there are two forms of loans- secured and unsecured. For a secured loan, the borrower pledges some asset (e.g. a car or property) as collateral for the loan, while an unsecured one requires no collateral. Unsecured loans are available in several financial institutions, who offer these loans under many different guises, such as:
- credit card debt
- personal loans
- bank overdrafts
- credit facilities or lines of credit
- corporate bonds
The interest rates for these different forms of loans may vary depending on the lender and the borrower.
Coming to the second half of the category, a mortgage loan is a very common type of debt, used by individuals to purchase housing. In this arrangement, the money borrowed is used to purchase the property while the financial institution is given security in the form of title to the house, until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, in order to recover the loan amount.
Under this category, we have provided resources to the different types of loans.
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