6/28/2017

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Loans

A loan is the usage of money or other property of value that is lent and is expected to be paid back, or returned, by the borrower over a certain period of time or on a set date. To be more precise, a loan is a debt that is taken on by individuals, companies, or other organizations that usually contain stipulations on how it is to be paid back.

How a loan is repaid depends on who is doing the lending and the relationship between the lender and the borrower. If it is money that is loaned, in most cases, it will be expected to be paid back in installments over a certain period of time. The installments can be set up as weekly, bi-weekly, monthly, quarterly, yearly, or for other periods.

Loans are generally given at a cost to the borrower. Interest may be charged and collected as an incentive for the lender to extend the credit in the first place. Fair lending laws have been written and implemented to insure fairness to borrowers and lenders alike.

Any time a loan is given, regardless of the amount, a contract should be written outlining the terms of the loan that include the amount of money borrowed, any interest added to the principal amount, if any, repayment responsibilities, and any restrictions or other obligations.

Whether the loan is being given by an individual, bank, credit union, mortgage company, or other financial institution, it is the responsibility of the lender to provide the borrower with a contract for repayment of the loan.


There are many types of loans that are given for different reasons and under different circumstances. The best type of loan for you depends on your needs and your ability to repay it.

A loan may be secured or unsecured.

  • A secured loan is one in which real or personal property is used as a pledge for repayment. Real property may be a home, commercial building, industrial building or complex, apartment building, vacant land, farm or ranch land, or other property. Personal property may be a car, jewelry, furniture, or other objects with value.
  • An unsecured loan is one that is given with a verbal or written agreement to repay with no property involved, real or personal.

Pawn shops, payday loans, personal loans, 401k loans, and income tax refund loans.

  • Pawn shops: Money is loaned against jewelry, cameras, watches, guns, musical instruments, tool, household appliances, and other valuables.
  • Payday loans: Basically an advance of money on a future paycheck or other sources of income.
  • Personal loans: Loans that are given that usually does not require collateral such as personal or real property.
  • 401k plans and certain stock options can be borrowed against.
  • Income tax refund loans are offered to people who want to get their refunds early.

When you apply to get a loan, the lender in the transaction normally expects the loan to be repaid and expects the payments to be made on time when they are due. It is up to the lender to do everything possible to protect his interests. A lender may require you to fill out a loan application, check your credit history, inquire about your assets, check employment history, and examine your other financial obligations.

Note: Interest that is charged on loans is regulated by state and federal statutes and most are strictly enforced.

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