What is a
personal loan? To understand this, we have to look at some
definitions.
First of all, lets take a look at "loan". A
loan means that you have got something that belongs to another and that
you have to give this back or in some other means give back someting of
a eaqual value.
Then let us see what Wikipedia has to say on this
issue:
A loan is a type of debt. All material things can be
lent; this article, however, 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. A borrower may be subject to
certain restrictions known as loan covenants under the terms of the
loan.
Acting as a provider of loans is one of the principal
tasks for financial institutions. 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.
Legally, a loan is a contractual promise of a debtor
to repay a sum of money in exchange for the promise of a creditor to
give another sum of money.
This article is licensed under the GNU
Free Documentation License. It uses material from the Wikipedia
article "Loan".
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