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Loans

Loans are often lent money that are commonly given out by banks. They must then be paid back to the bank, with interest, within a certain time period. The interest that is generated from a bank loan creates a large amount of revenue for financial institutions.

There are many different types of loan, including secured and unsecured loans. Secured loans are attached to collateral, meaning that if you default on payments, the bank can go after whatever you used as collateral such as your car. Examples of this are a mortgage, whereby missed payments could result in the bank selling your house. Unsecured loans do not have collateral attached; instead banks will simply trust you, meaning you must have a good credit rating. These types of loans usually have higher interest rates attached to them.



Other types of loans include line-of-credit loans (for small businesses whereby available cash is extended in a checking account, with interest), balloon loans (where only the interest is paid back until the final day, when the entire sum is then paid), instalment loans (payments made monthly for example) and interim loans (used for buildings).