The loan is a provision of cash or something else for a predetermined period of time. The loan arises between two persons - individuals or organizations (legal entities). The one who borrows is referred to as a creditor (or lender) a person who borrows a debtor. (or borrower).
How works a loan in practice?
Loan arises debt between the creditor and the debtor that the debtor has to repay. In addition to this pays an interest. There may be interest-free loans as well. The loan may arise on the basis of oral or written agreements. The legislation of developed countries regulates conditions for providing loans so that the outstanding loan or other non-compliance acting has legal consequences.
When providing loans are important to the following requirements:
- The way of providing (how the loan is passed)
- Subject of the loan
- Time period of the loan
- Reward (interest)
- The way of repayment of the loan (how the loan is returned)