| There are different types of loans. The secured loan is | | | | the collateral. Others are like car loans where you do |
| where the borrower is expected to give out or pledge | | | | not get to own the car fully until you finish furnishing the |
| property like a home, land or a car as collateral. Incase | | | | financiers loan. |
| they are unable to meet their debt obligation in due | | | | The second type of loan is the unsecured loan. This is |
| time, the lender disposes of the collateral to recover | | | | where no asset of the borrower is pledged as |
| their money. Such a loan like this one will mostly be | | | | collateral for the money that they get. Such loans |
| given by banks, insurance companies and other lending | | | | could include credit card debts, personal loans like |
| institutions. The money the borrower gets from the | | | | where a friend lends friend money or where a person |
| lender is referred to as the principal amount. | | | | approaches a bank for an overdraft loan. Such are |
| For a lending institution to make a profit in the money | | | | not secured by any asset of the borrower. The |
| that it lends out, it normally imposes an interest on the | | | | general characteristic of a loan is that it is not a gross |
| principal amount which is a percentage of the principal. | | | | income for the borrower because they have to pay it |
| This interest may differ with different institutions but | | | | back at some point. Even the unsecured loans |
| they are all bound to follow some law that controls | | | | sometimes have to be paid back with interest but |
| lending in their respective states. An example of a | | | | again this depends on the country's statutes |
| secured loan is a mortgage loan where the home is | | | | concerning loans. |