In finance, a loan is borrowing money from one individual, organization, or entity to an individual, organization, or other entity. A loan is a debt granted by an organization or an individual to another entity at an interest rate, and is evidenced by a promissory note specifying, among other things, the amount of money borrowed, the interest rate charged by the lender, and the date of payment. repayment. A loan requires reallocating the subject's assets for a period of time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows a sum of money, called principal , from the lender, and is obliged to repay or repay the same amount of money to the creditor at a later time.
Loans are generally provided at a cost, called interest on debt, which provides incentives for lenders to engage in loans. In legal loans, each of these obligations and restrictions is imposed by the contract, which may also place the borrower under an additional restriction known as the loan agreement. Although this article focuses on borrowing money, in practice material objects can be lent.
Act as a loan provider is one of the main tasks for financial institutions such as banks and credit card companies. For other institutions, the issuance of debt contracts such as bonds is a typical funding source.
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Type
Guaranteed
A secured loan is a loan in which the borrower promises several assets (eg cars or property) as collateral.
Mortgage loans are a very common type of loan, used by many to buy goods. In this setting, money is used to purchase the property. Financial institutions, however, are given security - liens on property rights - until the mortgage is fully paid off. If the borrower fails on loan, the bank will have the legal right to take back home and sell it, to return the amount owed to it.
In some cases, loans taken to buy a new or used car can be secured by a car, in the same way as a mortgage is secured by housing. The loan term is much shorter - often in accordance with the car's useful life. There are two types of auto loans, direct and indirect. Direct car loan is where the bank provides loans directly to the consumer. An indirect auto loan is where a car dealer acts as an intermediary between a bank or a financial institution and a consumer.
Unsafe
Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under various guises or marketing packages:
- credit card debt
- personal loans
- bank overdraft
- credit facility or line of credit
- corporate bonds (can be guaranteed or unsecured)
- peer-to-peer loans
Interest rates applicable to these various forms may vary depending on the lender and the borrower. This may or may not be governed by law. In the UK, when applied to individuals, this may be under the 1974 Consumer Credit Act.
Unsecured loan interest rates are almost always higher than secured loans because the unsecured lender option to ask for help to the borrower in case of default is very limited, subjecting the lender to a higher risk than the secured loan. An unsecured lender must sue the borrower, get a money assessment for breach of contract, and then pursue the execution of the judgment against the unencumbered borrower's assets (that is, which has not been secured to the secured lender). In the bankruptcy process, secured lenders traditionally have priority over unsecured lenders when the court divides the borrower's assets. Thus, higher interest rates reflect the additional risk that in the case of insolvency, the debt may not be collectible.
Request
Loan demand is a short-term loan that usually does not have a fixed date for repayment. In contrast, borrowing demand carries a floating interest rate that varies according to the primary lending rate or other specified contract terms. Loan requests can be "called" for payments by lending institutions at any time. Loan requests may be unsafe or guaranteed.
Subsidized
Subsidized loans are loans in which interest is reduced by explicit or hidden subsidies. In the context of college lending in the United States, this refers to loans that do not interest interest when a student remains enrolled in education.
Concessional
Soft loans, sometimes called "soft loans", are provided on much cheaper terms than market loans either through the interest rate under the market, by the grace period or a combination of both. Such borrowing may be made by a foreign government to a developing country or may be offered to an employee of the lending institution as an employee benefit (sometimes called seep). Maps Loan
Target market
Loans can also be categorized according to whether the debtor is an individual (consumer) or a business.
Personal
Common personal loans include mortgage loans, car loans, home equity loans, credit cards, installment loans and payday loans. The credit value of the borrower is a major component in and the guarantee and interest rate (APR) of this loan. Monthly payments on personal loans can be reduced by choosing a longer repayment period, but the overall interest paid also increases.
Commercial Loans for businesses are similar to the above, but also include commercial mortgages and corporate bonds. Underwriting is not based on credit score but rather credit rating.
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Payment of loan
The most common type of loan repayment is the full amortization payment in which each monthly rate has the same value over time.
Pembayaran bulanan tetap P untuk pinjaman L selama n bulan dan suku bunga bulanan c adalah:
-
For more information, see Compound interest # Amortization of monthly loans or mortgage payments.
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Breach in lending
Predatory borrowing is one form of abuse in lending. It usually involves lending to place the borrower in a position that a person can gain on it; subprime mortgage-lending and payday loans are two examples. Where the lender is not authorized or regulated, the lender may be considered a loan shark.
Riba is a different form of abuse, in which the lender imposes an excessive interest. In different periods of time and culture, acceptable interest rates vary from unattractive to unlimited interest rates. Credit card companies in some countries have been accused by consumer organizations of lending riba interest rates and making money from reckless "surcharge".
Harassment may also occur in the form of a customer who abuses the lender by not repaying the loan or with a view to deceiving the creditor.
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United States tax
Most of the basic rules governing how loans are handled for tax purposes in the United States are codified by the Congress (Internal Revenue Code) and the Ministry of Finance (Regulation of the Minister of Finance - another set of rules that interpret the Internal Revenue Code).
1. Loans are not gross income for the borrower. Because the borrower has an obligation to repay the loan, the borrower does not have access to wealth.
2. The lender can not deduct (from his own gross income) the loan amount. The reason here is that one asset (cash) has been converted into a different asset (repayment pledge). Reductions are usually not available when an expenditure works to create a new or different asset.
3. The amount paid to meet the loan obligation can not be deducted (from its own gross income) by the borrower.
4. The repayment of the loan is not a gross income to the creditor. As a result, the promise of payment is converted back into cash, without the accession of wealth by the creditor.
5. Interest paid to the lender is included in the gross income of the lender. Interest payments are compensated for the use of money or property of the lender and thus represent the gain or accession of wealth to the lender. Interest income can be attributed to the lender even if the lender does not charge a minimum amount of interest.
6. Interest paid to the lender may be reduced by the borrower. In general, the interest paid in respect of the borrower's business activity may be reduced, while interest paid on personal loans can not be reduced. The main exception here is interest paid on mortgage home.
Earnings from debt relief
Although the loan does not begin as income to the borrower, it becomes revenue for the borrower if the borrower is released from the debt. Thus, if the debt is released, the borrower has basically earned the same income as the debt. The Internal Revenue Code lists "Revenue from Debt Disposal" in Section 61 (a) (12) as a source of gross income.
Example: X owes Y $ 50,000. If Y takes off debt, then X no longer owes Y $ 50,000. For purposes of calculating revenue, this is treated the same way as Y gives X $ 50,000.
For a more detailed explanation of "debt relief", see Section 108 (Debt Income Cancellation (COD)) of the Internal Revenue Code.
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See also
US only:
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References
Source of the article : Wikipedia
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