loan

(noun)

A sum of money or other valuables or consideration that an individual, group, or other legal entity borrows from another individual, group, or legal entity (the latter often being a financial institution) with the condition that it be returned or repaid at a later date (sometimes with interest).

Related Terms

Examples of loan in the following topics:

  • Secured vs. Unsecured Funding

    • A secured loan is a loan in which the borrower pledges an asset (e.g. a car or property) as collateral, while an unsecured loan is not secured by an asset.
    • A mortgage loan is a secured loan in which the collateral is real estate.
    • A loan is a monetary form of debt.
    • Unsecured loans are monetary loans that are not secured against the borrower's assets.
    • Unsecured loans are often more expensive and less flexible than secured loans, but suitable if the lender wants a short-term loan (one to five years).

  • Short-Term Loans

    • In return for the loans and guarantees, KKR was offering roughly 2 percent in fees.
    • A payday loan (also called a payday advance) is a small, short-term unsecured loan.
    • The basic loan process involves a lender providing a short-term unsecured loan to be repaid at the borrower's next pay day.
    • A bridge loan is a type of short-term loan, typically taken out for a period of two weeks to three years pending the arrangement of larger or longer-term financing.
    • Bridge loans are typically more expensive than conventional financing to compensate for the additional risk of the loan.

  • Long-Term Loans

    • A mortgage is a loan secured by real property.
    • It requires a mortgage note affirming the existence of the loan and the encumbrance of the realty through the granting of a mortgage securing the loan.
    • Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.
    • Over this period, the principal component of the loan (the original loan) is slowly paid down through amortization.
    • Term: Mortgage loans generally have a maximum term, or a number of years after which an amortizing loan will be repaid.

  • Savings and Loan Associations (S&Ls)

    • A savings and loan association is a special kind of deposit institution that only participates in a subsection of financial activities.
    • A savings and loan association (or S&L), also known as a thrift, is a financial institution that specializes in accepting savings deposits and making mortgage and other loans.
    • S&Ls accepted savings deposits and used the money to make loans to home buyers.
    • Most of the loans went to people who did not make enough money to be welcomed at traditional banks.
    • Define a savings and loan association, and its role in the American banking system

  • Non-Bank Financial Institutions

    • You have probably seen ads for check-cashing stores, payday loans, and rent-to-own stores.
    • Consider your options to taking a high-cost loan and use loans wisely.
    • Many check-cashing stores also make payday loans.
    • A payday loan is a small, high-interest, short-term cash loan.
    • You run the risk of getting into a payday loan cycle of debt by taking out loan after loan

  • Commercial Banks

    • Commercial banks provide a number of loans.
    • A secured loan is when a borrower pledges some asset (e.g., a car or property) as collateral for it, which then becomes a secured debt owed to the creditor who gives the loan.
    • Commercial banks may also provide unsecured loans, which are monetary loans that are not secured against the borrower's assets (i.e., no collateral is involved).
    • Some examples of unsecured loans include credit cards and credit lines.
    • An overdraft is an example of an unsecured loan.

  • The Export-Import Bank of the United States

    • The Ex-Im Bank provides two types of loans: direct loans to foreign buyers of American exports and intermediary loans to responsible parties, such as foreign government lending agencies that re-lend to foreign buyers of capital goods and related services (for example, a maintenance contract for a jet passenger plane).
    • Ex-Im Bank is the principal government agency responsible for aiding the export of American goods and services through a variety of loan, guarantee, and insurance programs.
    • The Working Capital Guarantee program provides loan guarantees to banks willing to lend to exporting companies.
    • Two types of loans: direct loans to foreign buyers of American exports and intermediary loans to responsible parties, such as foreign government lending agencies that re-lend to foreign buyers of capital goods and related services (for example, a maintenance contract for a jet passenger plane).

  • Credit Operations

    • A line of credit may take several forms, such as overdraft protection, demand loan, special purpose, export packing credit, term loan, discounting, purchase of commercial bills, traditional revolving credit card account, etc.
    • However, unlike a term loan, revolving debt allows the borrower to draw down, repa,y and re-draw credit amounts advanced to her by the available capital during the term of the debt.
    • Repayment of revolving credit is achieved either by scheduled payments on the total amount of the debt over time, or by all outstanding loans being repaid on the date of termination.
    • In a loan, the borrower initially receives or borrows an amount of money, called the "principal," from the lender and is obligated to pay back or repay an equal amount of money to the lender at a later time.
    • The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan.

  • The Discount Rate

    • The Fed makes loans to depository institutions and charges different discount rates for each of discount windows.
    • The discount rate is the interest rate charged to commercial banks and other depository institutions on loans they receive from the Fed's lending facility, the discount window.
    • All discount window loans are fully secured.
    • Under the primary credit program, loans are extended for a very short term (usually overnight) to depository institutions in generally sound financial condition.

  • Debt Finance

    • Private debt comprises bank loan sorts of obligations, whether senior or mezzanine.
    • A basic loan or "term loan" is the simplest form of debt.
    • Such loans are also colloquially called "bullet loans", particularly if there is only a single payment at the end – the "bullet" – without a "stream" of interest payments during the "life" of the loan.
    • A syndicated loan is a loan that is granted to companies that wish to borrow more money than any single lender is prepared to risk in a single loan, usually many millions of dollars.
    • Loan syndication is a risk management tool that allows the lead banks underwriting the debt to reduce their risk and free up lending capacity.