I believe loan is one of the best inventions in human history.
Nowadays, money is everything. But it happens, when you want something badly and you don’t have enough money. It’s OK to borrow from a friend, but not a stranger. What if you need a large amount of money?
Take a LOAN!
In short, a loan is an amount of borrowed money with interest.
Loans are issued by corporations, financial institutions and governments. Interests of loans are a primary source of revenue for many banks.
Usually the terms of a loan are agreed by both parties. If lender requires collateral or a guarantee, this requirement will be written in the loan documents. Most loans provisions also include the interest rate, length of time and others.
Types of loans
Secured vs. Unsecured Loan
Loans can be secured with collateral or a co-signer. For example, mortgages and car loans are secured loans.
Loans such as credit cards and signature loans are unsecured loans. Because they are mot backed by collateral. Generally, unsecured loans have higher interest rate than secured loans, because they have more risks for lenders.
Revolving vs. Term
Revolving loans mean that you can spend the loan, repay, then spend again. A credit card is a revolving loan. Term loans mean that you should pay the loan in equal monthly installments over a period of time. For example, your car loan or house loan is a term loan.
Interest rate plays an important part in loans. If you have a higher interest rate, you may have to pay much money every month, or take longer to pay off.
The terms of interest varied from one another. That is the part you should pay attention to when you sign the terms. Also, there are different interest rates, for example, single interest and compound interest. You should take everything into consideration and choose the one best suit your economic situation.