Loan

A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower. The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt.

• Credit Report

Acting as a provider of loans is one of the principal task for financial institutions. For banks loans are generally funded by deposits. For other institutions issuing of debt contracts, such as bonds is a typical source of funding.

Other types of debt include mortgages, credit card debt, bonds, and lines of credit. A mortgage is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The bank, however, is given the title to the house until the mortgage is paid off in full. If the borrower defaults on the loan, the bank can repossess the house and sell it, to get their money back.

The abuse in the granting of loans is known as predatory lending. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her.

See also:
Default (finance)
Interest rate risk
Legal risk
Liquidity risk
Market risk
Operational risk
Volatility risk
Settlement risk

Also see:
Finance
Personal finance
Debt consolidation
Bank
Building society
Interest-only loan
Annualised Percentage Rate (a.k.a. Equivalent Annual Rate)
• Debt
• Unclaimed Money
• Structured Settlement

• Creditworthiness
• What is a Loan
• Annual Percentage Rate
• Origination Fee
• Point in a Mortgage
• Bankruptcy

This article is licensed under the GNU Free Documentation License. It uses material from the Wikipedia article "Loan".