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LOAN application website.
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 A
loan is a type of debt. All material things can be lent; this
article, however, focuses exclusively on monetary loans. 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. A borrower may be subject to certain
restrictions known as loan covenants under the terms of the loan.
Acting as a provider of loans is one of the principal tasks for
financial institutions. For other institutions, issuing of debt contracts
such as bonds is a typical source of funding. Bank loans and credit are one
way to increase the money supply.
Legally, a loan is a contractual promise of a debtor to repay a sum of money
in exchange for the promise of a creditor to give another sum of money.
A secured loan is a loan in which the borrower pledges some asset (e.g. a
car or property) as collateral for the loan.
A mortgage loan 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 financial
institution, however, is given security - a lien on the 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, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be
secured by the car, in much the same way as a mortgage is secured by
housing. The duration of the loan period is considerably shorter - often
corresponding to the useful life of the car. There are two types of auto
loans, direct and indirect. A direct auto loan is where a bank gives the
loan directly to a consumer. An indirect auto loan is where a car dealership
acts as an intermediary between the bank or financial institution and the
consumer.
A type of loan especially used in limited partnership agreements is the
recourse note.
A stock hedge loan is a special type of securities lending whereby the stock
of a borrower is hedged by the lender against loss, using options or other
hedging strategies to reduce lender risk.
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