Business And Consumer Loans (Part 1)

Loan

an agreement in which a lender gives money (principal) to a borrower in exchange for the future repayment of the principal along with interest or other finance charges.

Principal

the amount of money given by a lender to a borrower.

Lender

the person or institution that gives money to a borrower.

Borrower

the person who receives money from a lender and agrees to repay it.

Salary Loan

a type of loan intended for salary-related financial needs.

Student Loan

a type of loan used to finance education.

Car Loan

a type of loan used to finance the purchase of a vehicle.

Business Loan

a loan used by companies to pay for expenses they are unable to pay for themselves.

Business Loan Purpose

borrowed funds used for salaries and wages, office supplies, inventory, or business projects.

Consumer Loan

a loan given to consumers to finance specific types of expenditures.

Secured Consumer Loan

a loan backed by collateral or assets used to cover the loan in the event that the borrower defaults.

Collateral

assets used to cover the loan in case the borrower fails to repay.

Unsecured Consumer Loan

a loan that is not backed by collateral.

Mortgage

a consumer loan used to finance the purchase of a house.

Credit Card

a consumer loan used to finance everyday purchases.

Auto Loan

a consumer loan used to finance the purchase of a vehicle.

Personal Loan

a consumer loan used for personal purposes.

Business Loan Lender Requirement

lenders want to know how the business intends to use the borrowed money, so business owners must provide a clear outline of how the money will be spent.

Secured Loan Characteristics

generally grants the borrower greater amounts of financing, a longer repayment period, and a lower charged interest rate because the loan is backed by assets.

Unsecured Loan Characteristics

generally grants the borrower a limited amount of financing, a shorter repayment period, and a higher charged interest rate because the loan is not backed by assets.