A loan is a type of debt. The borrower initially receives money from the lender, which the receiver pays back to the lender. This service is provided at a cost, referred to as interest on the debt. When we borrow money, we are expected to pay for using it – this is known as Interest.
There are two types of Loans. 1. Secured and 2. Unsecured Loans. Secured loans are the borrowings against the security i.e. against mortgaging some immovable property or hypothecating/pledging some movable property of the company. This is known as creation of charge, which safeguards creditors in the event of any default on the part of the company. They are in the form of debentures, loans from financial institutions and loans from commercial banks.
The unsecured loans are other short term borrowings without a specific security. They are fixed deposits, loans and advances from promoters, inter-corporate borrowings, and unsecured loans from the banks.
Let’s discuss about few popular products:
- Home Loan
- Auto Loan
- Personal Loan
- Credit Cards
Stay tuned for detailed discussion on each of these loans.