What's what in finances: Loan

Temporary borrowing of a sum of money. If you borrow $100 you have taken out a loan for $100

The extension of money from one party to another with the agreement that the money will be repaid. Nearly all loans (except for some informal ones) are made at interest, meaning borrowers pay a certain percentage of the principal amount to the lender as compensation for borrowing. Most loans also have a maturity date, by which time the borrower must have repaid the loan.

Loan is the advance of a specified sum of money to a person or business (the borrower) by other persons or businesses, or more particularly by a specialist financial institution (the lender), which makes its profits from the interest charged on loans.

Loans may be advanced on an unsecured or secured basis; in the latter case, the lender requires the borrower to offer some form of collateral security (for example property deeds) which the lender may retain in the event of the borrower defaulting on the repayment of the loan.

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