Bank Loans
A loan is a financial and legal agreement between a borrower and a lender. Bank loans exist when banking institutions lend funds to their banking borrower clients. Loans can take the form of any item loaned or borrowed, but bank loans are normally monetary loans. Standard bank loans are specified sums of money loaned by the bank at agreed rates of interest that must be repaid within defined periods time. The original capital sum will remain the same over the period of the loan, but the interest rate and repayment term may alter with the agreement of both parties.
For example, loans may be associated with fixed or floating interest rates. A fixed-rate interest loan will maintain the same interest payment schedule throughout the life of the loan. A floating rate interest loan will have interest rate payments that will rise and fall according to prevailing interest rate levels. During periods of falling interest rates, floating rate payments will be preferable for the borrower, while fixed rate interest payments will be more suitable during periods of rising interest rates. The opposite situation will apply to the loan provider.
Bank loans are categorized into two main types – secured and unsecured. Secured loans are made by the bank against collateral provided by the loan taker. Such collateral may be in the form of valuable assets such as works of art, bonds or stocks. The most common form of collateral is real estate against which bank mortgage loans are granted. In this type of loan, the bank lender requires a lien against the property being purchased, which will be exercised in the event that the lender defaults on his house repayments. Unsecured loans are those where the bank is exposed to loan default by the lender. Unsecured loans include credit card debt, personal loans and lines of credit. Unsecured loans are normally for smaller sums of money compared to secured loans.
Individual bank loan types are many and varied. They include loans for specific purposes, for example loans for the purchase of automobiles. Others include student loans, home improvement loans, refund anticipation loans, syndicated loans and others.
For more infomation on loans choose from the list below. |
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