In financial terms, a loan is a lending of currency by one or more people, companies, institutions, or other authorized entities to another person, companies, institutions etc. The borrower is liable to repay the total principal amount borrowed and to also pay interest on this debt during the agreed period. It can be in the form of a home equity loan or a car loan or any other type of secured debt.
Loans are available in two forms i.e. simple interest and compound interest. A simple loan refers to the amount of cash that the borrower receives on the day he applies for it. On the other hand, a compound interest loan is a loan that has a compounding effect over a period of time. For example, if the loan amount is paid in two installments and the first installment is paid first and the remaining balance due is also paid in the next installment, the interest rate is the compound interest and so on.
A loan, whether in the form of a secured loan or an unsecured loan can help an individual in meeting various financial needs. It can help people to purchase a new house, to clear a few legal matters such as divorce, land survey or personal injury cases, to go for higher education and so on. Higher education is very necessary for most people but it can be very expensive and not everyone can afford it. If you are going for higher education and require a loan, you can opt for a student loan which is a loan taken by an individual for the purposes of higher education.
In case of taking a student loan, you can choose to take a subsidized loan or an unsubsidized loan. A subsidized loan means the government pays the interest while the borrower is in school so that he can be able to complete his higher education. On the other hand, an unsubsidized loan means that the government does not pay the interest while the borrower is in school. There are many lenders who specialize in offering student loans. You just need to choose the lender who can give you the best deal.
When applying for a loan through a lender, the first thing that the lender will look at is the credit history of the borrower. He also takes into consideration the amount that you have left at your disposal. If you have collateral such as your home or car, the lender may offer you a better deal. Also, if you have a good credit record and a big repayment duration, you can opt for smaller loans with lower interest rates. However, if you do not have collateral to offer, then the lenders usually offer borrowers high interest loans with small repayment durations.
One of the simplest types of loans is the gold loan. The golden loan is available for individuals who do not want to put up any collateral. The amount that you will receive depends on the gold value that you can offer to the lender. Another type of a secured loan is a CD. With a CD, the lender requires you to have enough money to cover the monthly payment.