A loan is essentially a loan when financial funds are given to an individual, company, or group of individuals in return for repayment of their loan principal amount plus interests. Each party establishes loan terms before any funds are advanced. Normally a loan can be secured by security including a home or auto or it can be non-secured like a credit card. In either case, the risk to the lender is minimized through a lien or ownership interest in the property securing the loan.
Mortgage terms generally have a thirty-year term and the mortgage repayments are set at a fixed rate with a repayment schedule. Mortgages can be refinanced when the initial terms expire but this is only possible if the original lender is still in business and willing to do so. Refinancing may also be possible if the original mortgage was modified by extending the term or reducing the amount owed on the loan. This is possible if the value of the home appreciates faster than the repayments can be repaid.
Commercial loan types are usually more complex. The most common type of commercial loan is a capital lease. Under this type of loan, a borrower leases the property owned by the lender. The property can be used as collateral to secure the loan repayments. The advantage of a this loan type is that borrowers can usually access higher interest rates and payment terms compared to personal loans.
An unsecured loan is basically an advance against an asset or unpaid funds. The assets that qualify for this loan are mainly the original value of the loan itself and the value of the signature on the document containing the loan conditions. Funds advanced from this type of loan are due directly to the borrower and not the lending entity. This means that borrowers can choose to pay higher interest rates as well as longer repayment periods.
A secured loan can either be a mortgage loan or an equity loan. If a borrower extends and settles an existing mortgage loan, he will be able to take out a second mortgage. In this way, he can use the funds as collateral. However, the repayment principal amount plus interest rate can be a bit higher when compared with an unsecured loan.
Business loans include equipment loans, land loans, and business start up loans. They are available to businesses that require specific equipment or machinery to begin their operation. These loans are used for different purposes, such as purchasing additional office space, adding employees, or remodeling existing offices. Depending upon the purpose, the repayment period may differ. Homeowners are also eligible for these mortgages to consolidate debt.
There are various other loans types, including personal credit cards, and payday loans. All of these have different ways in which they are paid back, and repayment terms may differ from one type of loan to another. Some credit cards are good for a grace period after which you have to repay at the end of the grace period or face late payment charges. Payday loans are generally paid back in 24 hours, and you have to repay the full amount on the due date.
One type of loan that is becoming popular is the gold loan. This is because gold, silver, or platinum coins are often used as collateral for securing a loan. In some instances, a borrower may borrow greater sums than what is required to cover his needs. To find out more about a gold loan, speak to your banker or search on the Internet. You can also fill out an online application if you would like to apply for a gold loan without visiting a bank or lending institution.