loans are financial instruments that allow individuals or businesses to borrow money from a lender under the agreement of repayment within a specific period, usually with interest. Here’s a bit more detail:
Key Components of a Loan:
- Principal: This is the initial amount borrowed. For example, if you borrow $10,000, that's the principal.
- Interest: The cost of borrowing the money, expressed as a percentage of the principal. Interest rates vary based on factors like credit score, the type of loan, and prevailing market rates.
- Term: The duration over which the loan is expected to be repaid. Loans can be short-term (a few months), medium-term (a few years), or long-term (several years).
- Repayment Schedule: This outlines how often and in what amounts the borrower needs to make payments (monthly, bi-monthly, etc.).
