Loan is a simple concept which means lending money from another individual, bank or organization.
It is kind of debt on which interest is applicable, it has a written evidence note and usually paid back on set defined time, either lump sum or in installments.
Debt loan has three main elements; principal amount, interest amount and the repayment date.
– Principal amount is the actual amount borrowed.
– The cost of loan or debt is referred to as interest.
There are two types of loans.
1. Secured loans
2. Unsecured loans