In financial terms, a loan is any loan that is taken out by one or more people, institutions, companies, or other financial entities to another persons, companies etc. The recipient is legally obligated to pay back the principal amount lent and usually incurs a loan debt after borrowing the money. A loan can be personal or corporate. Personal loans are taken out for home expenses, college education and weddings and the recipient is expected to return these with interest by the end of the term of the loan.
These loans are available to everyone through banks and money lending agencies. There are many different types of personal loans including credit card loans, payday loan, student loan, auto loan, and home equity loan. Auto loan and home equity loan are the two most popular types of personal loans available.
Auto loan involves taking out an amount of money against the car you intend to purchase. This is collateralized with your auto’s title. Payday loans involve the borrower repaying cash advance or a check for a certain amount of time until you receive the money you borrowed. Student loans are paid back by the graduates after graduating from college or university.
A loan agreement is between the lender and the borrower. The borrower agrees to the loan amount and he agrees to pay back the money within a specific period of time. The lender requires some sort of collateral for the loan. Collateral can be something like an automobile, real estate, jewelry, shares or anything of value.
There are many different types of lenders. Some of them are private lenders and banks. There are government backed lenders also. They offer low interest rates and long repayment periods. There are even specialized loan plans for people with bad credit.
If you are going for such a loan, always keep in mind that you are getting no formal written agreement from the lender. This means, you can negotiate on the terms and conditions of the loan but only if you have a good rapport with the lender. Always remember to read the fine print before signing the loan papers. A good rapport with the lender will help you get a lower interest rate and thus a lower monthly repayment amount.
You can apply for a home loans in many ways. You can use your credit score as the basic criterion for your loan application. If your credit score is high, then you can expect to get the lowest interest rate. It is important that you try to borrow only what you can afford to repay. If you borrow more than what you can repay, then it can lead to further complications in your financial life.
Many people opt for second home loans because they are secured against their first home. However, while applying for such a loan, you must always keep in mind the original loan amount and the amount that you are willing to pledge as collateral. Borrowers who are looking for loans with good interest rates and flexible repayment periods should opt for these types of loans.