We hear a lot about loans everyday. There are so many terms we use like bridging loans, payday loans, cash advances, bank loans etc. In real terms loan is actually a debt in which two parties are involved. One is the borrower and other is the lender. The borrower borrows the money and lender gives the money to the borrower. Loans are not of recent times. They have been in existence since years. It facilitates a lot when a person falls short of finance. Now, there are many things involved with the term loan and these are:

Rate Of Interest: Usually, loan is repaid along with the interest. In majority of the cases when the loan is for long-term interest is paid to the lender on monthly or yearly basis. The lender decides the rate of interest and if it is acceptable to the borrower they enter into the loan transaction. Rate of interest is in terms of percentage.

Period of Loan: The period of loan is the time till which, the borrower can keep the money borrowed with him. At the end of the period the borrower is required to make the repayment.

The Effect Of Loan: In the account books of the borrower, loan appears as a liability as it is the debt for him and in case of the lender it appears as asset as this amount is receivable.

Loan is actually a broad concept and there are many terminologies involved with it. However, mainly there are two types of loans. One is secured loans and the other is unsecured loans.

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