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WIKI ANALYSIS| This article is part of WikiProject Definitions. Consider editing to improve it. View articles referencing this definition. |
Loan
A loan is an arrangement to borrow money. The lender provides the money with the understanding that the borrower will return the corpus in the future plus interest which gives the lender an incentive to lend out the principal.
Investors use many types of loans for example it could be a purpose loan using securities as collaterall with proceeds from the loan being used to purchase additional securities. [1] Or it could be a Hypothecate loan pledging securities as collateral for a loan to use for a specific purpose, without giving up ownership of the securities. [2]
Loans can broadly be categorized in to two variations:
Secured Loans
This is the kind of loan where the borrower pledges some kind of collateral as a security until the principal is paid off completely. The most common example would be a Mortgage Loan, where the lender holds a lien on the house title until it's paid off in full.
Secured loans that lack sufficient collateral can sometimes be made by having the lender secure a guarantee from the SBA. Quickcash
Each lender will have their own underwriting criteria for a secured loan, but typically the following five factors of the borrower are considered: 1.) Capital 2.) Capacity 3.) Collateral 4.) Conditions 5.) Character [3]
Unsecured Loans
This is the kind of loan where the borrower does not provide a collateral. But, generally should provide proof of regular source of income and / or stable job so that the lenders can weigh their risk and come up with an interest rate for the term of the loan.
Examples would be, credit card loans, personal loans etc,.
13c, to lend, to borrow, originally, to let have, to leave (to someone), gift, loan is attested from 1620s, Loan word (1874), loan-translation is attested 1933. Slang loan shark first attested 1905. [1]
References
- ↑ A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton Gordon Malkiel ISBN-10: 0393062457 pg295
- ↑ A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing by Burton Gordon Malkiel ISBN-10: 0393062457 pg182
- ↑ http://bizplancompany.com/the-5-cs-of-lending/
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