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Loans
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A loan is a financial transaction in which one party - the lender - agrees to give
another party - the borrower a specific amount of money which must be paid back
in full.
There will also be interest payments at an agreed rate, and sometimes there are
additional charges for the administration of the loan by the lender. The terms and
conditions of a loan will vary from lender to lender but will be specified in the
contract. The lender can ask for interest payments in addition to the original amount
of the loan which is also sometimes known as the principal. The borrower must adhere
to the repayment terms stated in the contract especially repayment dates and interest
rates. Some lenders may also assign financial penalties for missed or late payments.
Loans come in all shapes and sizes but overall there are two main types, secured
and unsecured loans. With a secured loan the lender can force the sale of the asset
the borrower has offered as security against the loan. On the other hand for an
unsecured loan the lender relies on the borrower's promise to pay the money back.
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