Forex Affiliate

Forex Affiliate

by Shawn

Loans are normally, but not always, a financial arrangement where a sum of money is lent to another person; before the money is made available to the borrower, they will need to sign an agreement which stipulates the repayment terms. Whilst just about anything, product or service can be lent out; the information below focuses on financial arrangements only. Unlike most other types of loan, those involving cash will gradually be paid back over a period of time previously arranged; the usual repayment method is based around monthly installments but this period can be longer.
The debt is repaid but an interest charge is added for the service being provided and the method by which the lender is compensated. Although not seen as much these days one type of financial agreement ensures that the first payments made to clear the debt are in fact just the charges on the sum owed. More frequently the amount is repaid in equal installments, a portion of which is the interest.

Acting as the provider is one of the principal tasks for financial institutions. A loan is a simple way for many people and businesses to have a sum of disposable money in the bank (it's just the amounts that differ); many other cash raising methods exist but this is the simplest.

Arranging a mortgage, whilst a little more complicated, is in essence the same but the use for which it is required is not flexible and the money can never be used for anything other than buying a house or land. The financial institution is given security however; in this case the title to the house, until the mortgage is paid off in full. This security means that defaulting on the loan may leave the lender with no alternative but to repossess the property; whilst they can reclaim money owed immediately this way, they may also decide to retain the property until a later date.

Even small loans can be secured but this generally only happens when a person has a poor credit history which could be the case of a person buying a car; in much the same way as a mortgage is secured by the house itself. Car loans are generally much shorter as the useful life of a car is correspondingly reduced; for cars, this very rarely extends beyond five years.

The marketing companies are clever at disguising unsecured loans and the vast majority of people do not even realize they probably have them; credit cards, bank overdrafts and other forms of finance all fall into this category. Every bank and other financial institution has different methods to calculate the interest they charge on unsecured credit but a good rule of thumb is that store cards will be the highest followed by credit cards.

Financial companies can be caught out too when they provide cash to a person so they can gain advantage over his or her situation; also known as predatory lending. This is an area where credit card companies in some countries are also criticized as they supply cards at very high rates of interest and add on other spurious charges to the holder. Try to remember what has been written here and you might not have too many problems.