Know what loan is before requesting, what is loan?

[Deleted member 62875]

Based on what a review I did, a loan is when one receives finance from a organization, friend, or some finance entity with the assurance of returning it in the future along with the principal as well as the interest. Principal is the borrowed amount, and interest is the charge on receiving the loan. Considering that lenders take a risk by offering you the loan facility and the fear that you may not be in a position to repay the same,, they have to protect the losses by charging an amount in the form of interest.
Mostly loans are categorised as secured or unsecured. Secured loans pose the need for promising an asset such as a car or house as a loan collateral in case the borrower defaults, or does not repay the loan. In this case, the lender gets the possession of the asset. Unsecured loans are sought after, yet less common. In case the borrower fails to pay back an unsecured loan, lender cannot take anything in return.

 

[Abigael]

You have given a very good definition of what loans are. It is very important to know all these for sure so that you can be prepared before taking the loan. That way, you can have a plan on how to pay it back.

Since loans require you to pay both the principal and the interest, it is important that as you work hard to earn money, remember to get enough for paying back the loan. That way, you build a good credit history with your loan lender.

It is also important to know the consequences of not paying back a loan. Such as getting a bad credit history, undergoing loss such as the collateral being taken and loosing the relationship with your loan lender. Knowing these consequences will push you to earn money so as to pay back the loan.