What is a loan?

This is one of the most basic financial concepts that there is, and refers to one entity, usually a financial one like a bank, giving money to someone (the lender) on the promise that they pay that money back over time.

Furthermore, interest will be added to the loan such that the total amount paid is usually substantially more than the sum lent, and usually repayments are made on a monthly basis.

There are various types of loan products, and whilst we don't tend to think of it as such, the mortgage is really the ultimate loan product. Loans can be secured against assets in order to give the financial institution security that they will be able to get their money back.

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