What is a loan?
The loan is a financial transaction in which one party (creditor) agrees that the other party (debtor) provides a certain amount of money with the expectation of the total repayment. Specific loan conditions are often determined in the form of a bill of exchange or other contract. In addition to the original loan (principal), the creditor may apply for interest payments. The debtor must agree to the repayment conditions, including the amount due, interest rates and maturity. Some creditors can also assign financial sanctions for missed or late payments. Buying a new vehicle or house almost always requires a form of financial assistance, whether it is a bank mortgage or a private loan with the seller. Financing of higher education may also require a federally supported student loan. The interest rate of these types of large transactions can be determined at the time of application or may vary according to the federal main interest rate.
There is a very important legal difference between gift and loan. For example, a very generous relative or friend can give a person $ 5,000 (USD) for car repairs. If it does not expect repayment, money can be considered a gift. The donor could not sue for repayment later in civil proceedings. However, if the creditor determines the money as a loan and the debtor pays even one dollar, the money can be considered a legal loan and the creditor may require repayment at any time. The courts for small demands spend most of their time by determining whether a transaction involving money was a gift or a loan. Therefore, when concluding private agreements between friends or related paperwork.
Most loan applications or other professional credit institutions are administered. They can use any number of criteria to determine whether a potential debtor is capable of borrowing money. Past credit history is almost always considered along with current income and assets. The purpose of the loan can also be a factor - forA sermon investment opportunity can have more attraction than an unproven idea for a new restaurant. One important consideration is the ratio of income to the debtor's debt and whether the debtor dares to pay the money back. Professional creditors basically "sell" money, so debtors have to realize how much loan really "costs" when it comes to real dollars and cents.