What is a Loan?
I have written this article to help those people who want the knowledge to know what a loan actually is. Below, there is some information about loans as well as abuse in borrowing loans. It is important that we should know.
A loan is a sum of money which is given to a borrower by a lender who decides to allow or not. This amount of money borrowed, will have to be returned in full to the lender.
There are agreed rates in interest payments as well as the lender who can ask for these interest payments. This is sometimes known as principal. The terms and conditions which vary between many of the lenders are written down in a contract. Be warned that if you miss your payment dates as well as making late payments, lenders can give you penalties! So make sure that you are strictly complying with the rules.
Secured and Unsecured Loans
The loans come in different shapes and sizes. However, there are two types of loans which is a secured and unsecured loan.
When you have a secured loan, the borrower can offer something which can as security against the loan; this will be like a home or a car. But beware that if you cannot pay the money back, you could lose your house or car. But an unsecured loan is when the borrower can promise the lender that he/she will be able to pay the money back either in full or small instalments which are referred as interest.
Abuses in Lending
There is a form of abuse in lending out loans to borrowers which is known as ‘Predatory loans’. This sort of abuse is when a borrower is given a loan which puts him in such a position that the lender can gain advantage.
Another form of abuse is known as ‘Usury’. This is when the lender charges the borrower with a lot more interest. The rate is near from nothing to unlimited interest rates.
Try Avoiding Loans
It is better to avoid in taking out a loan because they contain a lot of hidden costs like interest payments and charges. However, if you really think it is necessary to apply then do so. But do remember that they can cause you a lot of trouble if you do not pay the money back.
Conclusion
We should all know what a loan is because in the future, we might fall into needing one as well. However, I think that loans can cause trouble like I have stated in the above paragraph. I hope you enjoyed my article.
4 Comments
Interesting article.
Very interesting article. This will be helpful to many readers.
The way the economy is running today there may be no loans tomorrow. In hopes that loans continue and borrowers pay their debts. Good luck with your writing.
The idea is good, but there are a few errors.
The principal is the amount of money you borrow. So you must pay back the principal plus the interest.
Predatory lending is a media term and has no meaning in finacial institutions. Note: do not take fiancial advice from a journalism major.
All of the costs in a loan must be disclosed up front by federal law. That is why you always sign a disclosure statement (the long piece of paper with all the boxes) before the loan is made.
good write up, though im not into it… it’s a good advice!