The word loan refers to a kind of financial credit line where a particular amount of money is loaned to another party under the promise of future repayment of a certain amount of cash. In most cases, this loan is secured by property such as real estate, automobiles, etc. In certain circumstances, however, unsecured loans are given. In these cases, there is no collateral or security required. The recipient of the loan is liable only for repayment of the amounts outstanding after his or her interest and applicable fees have been deducted. In most cases, the creditor also adds finance charges and interest to the principal amount that the loan should be repaid in addition to the principle balance.
The most common type of loan is a secured loan. In this case, both the parties agree to an amount that the loan amount will be paid back over a period of time. The loan terms are agreed to by each party before any money is deposited to ensure that the loan will be repaid. Collateral is usually in the form of property that the person with the loan has already pledged. A person can pledge real estate, automobiles, etc.
Another type of loan is an installment loan, wherein a fixed amount of money is placed into an account until it is used. This can be extended for a certain period and used until the loan is repaid. These kinds of loans are available for a short-term period or a longer one. With this, the money that is deposited into the account is available for spending, immediately. With this type, the person who has placed the funds into the account can decide on how long they would like to keep the funds in the account.
There is also another kind of secured loan called a gold loan. With these kinds of loans, an investor will be given a piece of jewelry as collateral. As long as the jewelry is not worn out or damaged, the investor will be allowed to use the money as stated in the contract. Some people use these loans for buying precious stones. The only problem with these loans is that collateral is usually at a very high amount, which can make owning the jewelry a difficult task to afford.
Most of these loans are short-term and lenders do not require any form of collateral for borrowing. However, there are some who require collateral for the lending process. This usually applies to bigger amounts. Lenders have different levels of interest rates, and if the loan amount is large enough, then some lenders will require the borrower to use his/her home as collateral.
Loans are a great way for people to finance their emergencies. However, before deciding on which lender to apply to, it is important to look into all the terms and conditions of each one so as to know what is being offered. A borrower should also look into the available finance programs to find out which program would be best suited for his/her individual situation. There are many lenders online that offer this type of loan, but it is advisable to apply to at least five lenders to get better rates and affordable terms. Remember to carefully read through the terms and conditions of each lender before making a decision to secure a loan.