Loans
Loans
A loan is a type of debt. Loan involves lending anything from money to virtually all materials. Most of the time when we talk about loans it means monetary loans. Like any other kinds of debts, a loan involves the redistribution of financial assets over time, between the borrower and the lender.
Types of Loans
There are basically two types of loans:
Secured Loans:
A secured loan is a loan in which the borrower pledges some asset as collateral for the loan. Most common type of secured loans are:
- Mortgage loans
- Car loans
- Home refinance loans
The interest rates applicable to these secured loans are generally lower than that to unsecured loans, since security decreases the risks associated with the loans.
Unsecured Loans
An unsecured loans is a loan in which borrower need not pledge any asset as collateral for the loan.
- Credit card debt
- Personal loans
- Bank overdrafts
- Lines of credit
- Corporate Bonds
Due to the high risks involved, the interest rates applicable to unsecured loans are generally higher than that to secured loans.