Loan, a well known word for the generations over time, is a kind of debt itself which is taken by the borrower from the lender to pay for various purposes. The borrower has to pay it off in installments of some fixed amount with dramatically different interest rates. The debt taken by the borrower is called the principle amount which has to be repaid by the borrower to the lender with some interest. These interests are nothing but the extra amount over the principle taken by the lender as an incentive so as to keep engaged in the loan.
It is not much easy to take the loan, as simple as it seems to be from the definition of loan. There are lots of complications to get loan with proper and low interest rate. Especially these days the process to take loan is becoming more and more complicated, but still it is something which everyone needs at some stage of life, to have something which the person can’t afford to pay completely at a time.
There are different types of loans offered by the banks to help people to fulfill their wishes and dreams. The loans are mainly categorized into two types of loans; secured loans and unsecured loans. Further which are classified as personal loan, home loan, car loan, student loan, business loans etc.
Loans are sometimes taken or given either on verbal confirmation by the borrower in case there is mutual trust between the two parties or sometimes there are written affidavits. Legal Loans are not taken or given just on verbal note. There is always a legal contract or affidavit for this purpose. The borrower has to sign some obligations and restrictions which are mentioned in a contract. These restrictions are known as loan covenants.
This way loans helps us or the borrower and the lender in equal ways and provides mutual benefit conditions for both the parties.