What is a Loan?
A loan is a sum of money that one party (usually a bank, financial institution, or lender) gives to another party (the borrower) with the agreement that it will be paid back later, typically with interest. Loans help individuals and businesses get the funds they need to make large purchases, start projects, or cover expenses when they don't have enough cash upfront.
Types of Loans
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Personal Loans: For personal expenses like home renovation, travel, or medical emergencies.
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Home Loans (Mortgages): To buy, build, or renovate a home.
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Auto Loans: To purchase a car or other vehicles.
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Student Loans: To pay for education expenses.
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Business Loans: To start or expand a business.
Key Components
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Principal: The original amount borrowed.
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Interest: The cost of borrowing the money, usually expressed as a percentage.
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Term: The period over which the loan must be repaid.
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Repayment Schedule: Details when and how much the borrower must pay back.
Why People Take Loans
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To afford big purchases without saving for years.
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To invest in opportunities like education or business.
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To manage emergencies and unexpected costs.
Important Things to Remember
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Always read the loan terms carefully.
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Understand the interest rate and total repayment amount.
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Borrow only what you can afford to pay back.
