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Loan

A loan is a redistribution of financial assets over time, between the lender and the giver of the loan. The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular instalments, to the lender. This service is generally provided at a cost, discounted as interest on the debt, to the lender. Acting as a provider of loans is one of the principal task for financial institutions. For banks loans are generally funded by deposits. For other institutions issuing of debt contracts, such as bonds is a typical source of funding.

A mortgage is a very common type of loan, used by many individuals to purchase housing[?]. In this arrangement, the money for the loan is used to purchase the property. The bank, however, is given the title to the house until the mortgage is paid off in full. If the borrower defaults on the loan, the bank can reposess the house and sell it, to get their money back.

See also: Finance



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