In economics, a loan is any lending of currency by one or more persons, institutions, companies, or other entities to others, usually other individuals or businesses. The recipient is obligated to repay principal plus interest on that debt before it is finally paid off and to repay the remaining balance owed. The loan may be secured by collateral such as real property or a car, but may also be unsecured, such as credit card balances or personal loans.
There are many different types of loan, including-secured, unsecured, short term loan, interest-only, and long-term loan. Secured loans are those in which the borrower relies on the security of a valuable asset to secure the loan, while unsecured loans rely on no asset for collateral. With a secured loan, the lender will often require a borrower to pledge an asset as a form of security against the loan. For this reason, secured loans tend to have lower interest rates and longer terms than unsecured loans.
A short term loan, also called payday loan or cash advance loan, is a small-payment loan that can be paid back over a period of time. These loans are often used by those who are in need of temporary financial relief due to illness, unemployment, or emergency travel. Some examples of short term loans include – payday loans, personal loans, and gold loans. Gold loans, also known as e-gold loans, are online unsecured loans that can be funded and returned via electronic transfer. While cash advance loans are paid back within a few weeks, e-gold loans are outstanding and non-repayable. If e-gold is your choice, be sure to use one of the top online lenders and be sure to choose a secure payment method.
Longer term personal loans are typically used by those who have a stable job and steady income. You may borrow money to renovate your home, pay for tuition expenses, or purchase a car. Unlike short term loans, long term personal loans have better interest rates and repayment terms. However, they can also have a significant impact on your credit score, which you want to avoid at all costs. When you borrow money for more than you need, you put yourself at risk for not being able to repay, which will damage your credit.
Another type of personal loan is secured consolidation loan. This is a loan in which you have to use collateral – usually your house – to secure the loan. Some examples of secured loans are home equity loans and car loan refinancing. If you have a low interest rate on an existing account with a bank, you may want to consider taking out a new secured loan to consolidate debt. In many cases, interest rates are reduced if you have a good credit history with the same bank.
Long term loans can be useful when you need to have some extra cash in the bank but cannot meet the full repayment amount at once. If you are unable to keep up with the payments, the loan principal is likely to go out of reach until you have some extra funds to make repayment. Therefore, a loan may be the best solution to avoid repaying the loan principal until you have some extra money in the bank. The repayment terms should be designed carefully with this in mind.