Loan

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A loan is a type of debt. All material things can be lent but this article focuses exclusively on monetary 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. Traditionally, lending institutions were of the "bricks-and-mortar" type such The Bank of America or HSBC Bank, but increasingly, online financial instituitions such as http://www.creditcardbank.co.uk/acatalog/Personal_Loans.html in the UK and http://www.uscreditcardbank.com/acatalog/Personal_Loans.html in the USA, are becoming increasingly prevalent as "One-Stop-Shops" for personal and business finance sourcing. For other institutions issuing of debt contracts, such as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.

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.

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.

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