Loan (Elementary)
A loan is a type of financial agreement in which one party (the lender) provides money or other assets to another party (the borrower) in exchange for repayment of the loan amount plus interest. The borrower is usually required to provide collateral, such as a house or car, to secure the loan. Loans are typically used to purchase large items such as a car or a house, or to cover expenses such as medical bills or college tuition. Loans can also be used to finance business operations or investments.
History of Loans
Loans have been around since ancient times, with the earliest known loan contracts dating back to 2000 BC. In the ancient world, loans were typically used to finance trade and commerce, and were often secured by collateral such as land or livestock. In the Middle Ages, loans were used to finance wars and other large-scale projects. In the modern era, loans are used to finance a wide variety of activities, from purchasing a car to starting a business.
Comparison of Loan Types
| Type of Loan | Interest Rate | Repayment Terms |
|---|---|---|
| Personal Loan | 6-36% | 1-7 years |
| Home Loan | 3-5% | 15-30 years |
| Car Loan | 3-7% | 1-7 years |
| Student Loan | 4-7% | 10-20 years |
Summary
A loan is a type of financial agreement in which one party provides money or other assets to another party in exchange for repayment of the loan amount plus interest. Loans have been around since ancient times and are used to finance a wide variety of activities. Different types of loans have different interest rates and repayment terms. For more information about loans, visit websites such as Bankrate.com, NerdWallet.com, and Investopedia.com.
See Also
- Interest
- Collateral
- Credit Score
- Debt
- Mortgage
- Secured Loan
- Unsecured Loan
- Loan Agreement
- Loan Default
- Loan Modification
