Loans

Where a person or company borrows money from another with the intention of paying this amount back, the money is said to be on loan; once the terms have been agreed, a legal contract will need to be signed. Lending money has been around since it was invented although people and other goods or services have been lent to others for longer but as the majority of these are for money; this is what this article is about. Like all debts, a monetary loan entails the gradual payback of the initial sum borrowed over time, between the lender and the borrower; the usual repayment method is based around monthly installments but this period can be longer.

All monetary debts consist of two elements: the sum owed and the interest charge for the time during which it is payable over; this is added to the overall amount owed. One type of arrangement is to have the interest paid off before the sum so the first few installments might only be the interest charges that have been added. More frequently the amount is repaid in equal installments, a portion of which is the interest.

Acting as the provider is one of the principal tasks for financial institutions. Credit and bank loans are a quick and easy way for anyone to increase their cash flow with only minimal effort; this is the simplest and most reliable means to raise finance.

A mortgage on the other hand is designed for one purpose, that of purchasing property or land and is one of the most common types of long term debt individuals experience. In this instance, the lender is given security on the money advanced in the form of the title deeds of the house until the debt is repaid in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it; to recover sums owing to them, they may place it an auction.

Although not a regular method of security, the financing company may demand that the object of the loan also becomes the security for it; in this instance, the car becomes it's own security for the debt. Car loans are generally much shorter as the useful life of a car is correspondingly reduced; where cars are concerned, this term will only last a handful of years.

Financial companies organize unsecured loans everyday although many people do not even realize that is what they are being provided with; usually this type of arrangement refers to money, credit cards and bank overdrafts, to name a just a few. Although it is difficult to provide any interest rates as they will differ greatly from one bank to the next, if you want to lose the highest interest rate unsecured debt you have: cut up those store cards.

On occasion it is has been known for financial companies to apply direct and indirect pressure for someone to use one of their services so that the company will have a hold over the individual; this type of abuse is known as predatory lending. Criticism of some credit card suppliers in a number of countries is also made as they issue cards to individuals at extremely high rates of interest in an underhand attempt to keep them paying off even small balances for a long period. The wise person treads carefully when dealing with financial institutions as they only have one agenda.