WHAT IS A LOAN?
A sum of money
borrowed usually for a specific reason like to
obtain an education, buy a car, build your home etc. The entity
lending the money which can be a bank, an institute, or
government usually charges interest for on the money lend
. The amount of money borrowed is typically repaid with interest
over a specified period of time. the money which is borrowed is
called PRINCIPAL, the cost of borrowing is called the
INTEREST and the allowed time for paying back your loan is
It is better to take a loan for very large purchases or when you
are in an
emergency. Getting a large loan or getting many loans that you
can't pay back can cause huge financial problems for you as it
becomes difficult to pay them back.
TYPES OF LOAN
When you get an installment loan, you borrow all of the money at
once and repay it in set amounts, or installments, on a regular
schedule over a period of time.
Line of Credit
A personal line of credit is a type of revolving credit that
lets you write checks for the amount borrowed, up to a
limit set by your lender. The creditor doesn't cost
you issue a check. as you issue a check you begin to pay interest on the amount
you borrowed. Whatever you repay becomes available for you to
BENEFITS OF LOAN
A loan gives you the money you need to pay for something big
like a house, a car, college tuition, or major home repairs when
you don't have the cash to cover the purchase. these loans let
you borrow the money when you require it and let you pay
back in small installments over a period of time.
COSTS OF LOAN
The cost of a loan is determined by the interest rate the lender
offers and the length of time i.e. the interest and
the term you take to repay. In addition to interest, a
lender may charge other fees called points for the loan
application or to check your credit.