Loans

Well, what exactly is a Loan? Yeah, we're going to talk about loans and only loans here. A loan is something like a debt. Firstly, what is a debt? A debt is that which is owned and it generally refers to the assets that are owned by a person. Now, coming back to Loans, it allows the redistribution of many financial assets over time, between lenders and borrowers.

The borrower borrows an amount of money from a person, who is the lender, and this amount is payed back, usually but not always in regular installments, to the lender. And when the borrower pays the amount back to the lender, the borrower has to provide an extra cost which is referred to as interest on the debt. The borrower may be subject to many restrictions and these restrictions are known as loan covenants under the terms of the loan.

Now, we have different types of loans and they are 'Secured' and 'Unsecured' Loans.

Secured loan means that there isn't any risk involved. The borrower has to pledge some asset for the loan. We have heard of mortgages and this is what it is actually. Suppose, a person wants to buy something, and when the person takes up a loan, the person mortgages something that belongs to them so as to relieve the lender of several risks.

Next we look at unsecured loans and these are loans that are not secured against the borrowed assets. The interest rates may vary and may or may not be regulated by law.

A Business Loan is that which is for official purposes. It has got to do with the business perspective. If one has to do business, one has to acquire a loan for several reasons which include investments. This helps them and their business to prosper.

Now, what are Personal Loans? Personal Loans are those which are used for our very own purpose of living. We need loans to prosper in life. And we need them for self sustenance. Suppose, say a person wants to buy a car and doesn't have a huge sum of money in hand. Then, the person can avail a personal loan and get the money needed for the car. Loans have become famous in this present economical trend.