Simple Understanding What is Loan and Its Basic Components of Loan

here are times in our life that we need to have loan because of different factors and reason in life. If you are thinking to have a loan you should understand first what is “loan”. This article is for you to know what is loan and what are the most basic part of a loan. This is made simplest for the readers to understand it clearly.

Loan is borrowing of money or things that you will pay it in future. It has an “interest”, when we say interest it is the cost of your loaned money. Example you loan 10000 pesos. If the lender will say it will cost 10% interests it means you will pay 10% interest which cost 1000 pesos. Interest will depend on your agreement before you take the loan. In the agreement you will also agreed of terms of payments.

Terms of payments mean how and when you should pay the loan. There are loans that will be paid in whole amount, but some are monthly for example the 10000 pesos with 10 percent interest should be pay in 10 months , you need to pay 10100 pesos every month so that you can pay the loan 11000 with interest in just 10 months. Below will discuss about what is loan:

What are “Secured loans” and “Unsecured loans”?

Loans that have “collateral” are secured loans. What is collateral? These are items or things that can be put for exchange if the loaner cannot pay the loan. It means that Secured loans are safer part for the lenders because they can still have items if loaner cannot pay the loan. One example of secures loans are the bank and pawn shops. Loans that don’t have collaterals are “unsecured loan”, it is just pure agreement and signature. Most of unsecured loan have higher interest this is because this term is more risky for the lenders.

“Term loan” and “Revolving loans” Revolving loan is when you loan and pay it, then loan again then pay it again. The best examples of these are credit cards. Term loan are the loan that has fix date of payments and interest. Examples of these are agreement loan, signature loans and pawn shop loans. Remember these are explanation of what is loan.

There are no techniques and strategies that have been discussed in this article. If you wish to know about strategies and techniques in having a loan you can search for Cash Mart Loan Philippines.