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Things to Consider when Taking a Loan

A loan is a contract between two people, in which the debtor must repay the sum of money the creditor has promised to loan. There are many kinds of loans available, and the following are some of the most common:

The Secured Loan
Secured loans are those that are secured by collateral, specifically property. Also called ?mortgage loans?, they give the right to the lender to seize the borrower?s collateral if the loan is not returned. Acting as a kind of insurance policy, the lenders usually will not lend more than 100% of the property?s value. Sometimes, lenders may also include businesses and personal assets.

Unsecured Loans
These are loans which are not secured by collateral. Unsecured loans are most commonly available from financial institutions in the form of marketing packages, such as credit cards, bank overdrafts, and corporate bonds. These loans require than an interest rate be paid, which is dependent upon the institution and lender.

Short Term Loans
Short term loans are usually taken as commercial loans for businesses. As the name implies, these loans are short term ? usually no more than 3 years - and as such require fixed payments and a fixed interest rate. Short term loans are also backed by collateral in most cases.

Long Term Loans
Long term loans are in almost all cases designed exclusively for asset and equipment purchases for businesses. The loan is secured by the assets and equipment being purchased, and generally entails covenants such as prepayment penalties and interest rate changes.

Military Loans
A member of the military may receive a loan usually up to $10,000 for the following purposes: emergencies, education, travel, family visits, a new child, debt consolidation, payment of bills, vacation, repairs, and practically any other reason that fits the needs of the member.