Business, Legal & Accounting Glossary
In economics, loan is defined as an act of providing property, money, or any other form of material good to another entity. A loan is provided in anticipation that it would be paid back in principal along with a certain amount of interest. There are a couple of broad categories of loans – they may be lump sum and the specific amount or they may be provided as credit that is open-ended and has a certain ceiling amount.
Both parties of a loan, provider and receiver, receive the terms of a standardized loan in a formal way. This is done before the loan is provided to a borrower. There are two basic types of loans like secured loans and unsecured loans. Secured loans require a collateral to be attached to them and this clause is mentioned in the loan contract.
A loan contract contains a number of arrangements like the amount of interest with which the loan is to be paid back. There are also other important aspects like the time period to be granted for repaying a loan. These clauses become very important later on, for both lenders and borrowers.
Nowadays, there are individuals, financial institutions, corporations, and governmental organizations that provide people with loans.
Loans serve a wide array of economic purposes that may be mentioned as below:
Loans also provide banks and other financial organizations, which deal in them, with a lot of revenue that is important for their sustenance.
A commercial bank is a type of financial organization that provides loans to individuals and business enterprises and also accepts deposits. Commercial banks are different from investment banks. Investment banks mainly perform the following functions:
He made a payment on his loan.
He got a loan of five thousand pounds.
Thank you for the loan of your lawnmower.
All loans from the library, whether books or audio material, must be returned within two weeks.
To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.
Definitions for Loan are sourced/syndicated and enhanced from:
This glossary post was last updated: 28th March, 2020 | 3 Views.