Home Equity Loan
Loan
A loan is a type of debt. All material things can be loaned but this article
focusses exclusively on financial loans. Like all debt instruments, a loan
entails the redistribution of financial assets over time, between the lender and
the borrower. The borrower initially receives an amount of money from the
lender, which they pay back, usually but not always in regular installments, to
the lender. This service is generally provided at a cost, referred to as
interest on the debt.
Acting as a provider of loans is one of the principal task for financial
institutions. For banks loans are generally funded by deposits. For other
institutions issuing of debt contracts, such as bonds is a typical source of
funding.
Other types of debt include mortgages, credit card debt, bonds, and lines of
credit. A mortgage is a very common type of debt instrument, used by many
individuals to purchase housing. In this arrangement, the money is used to
purchase the property. The bank, however, is given the title to the house until
the mortgage is paid off in full. If the borrower defaults on the loan, the bank
can repossess the house and sell it, to get their money back.
The abuse in the granting of loans is known as predatory lending. It usually
involves granting a loan in order to put the borrower in a position that one can
gain advantage over him or her.