Loan
A loan is a financial arrangement in which a lender provides money to a borrower with the expectation that it will be repaid, usually with interest, over a specified period. Loans are commonly used by individuals, businesses, and governments to finance large purchases, investments, or other expenses. The terms of a loan, including the interest rate, repayment schedule, and collateral requirements, are outlined in a loan agreement.
Example
A business takes out a $500,000 loan from a bank to finance the purchase of new equipment, agreeing to repay the loan over five years at a fixed interest rate of 4%.
Key points
• A financial arrangement where a lender provides money to a borrower with an agreement to repay it with interest.
• Used by individuals, businesses, and governments to finance purchases and investments.
• Terms, including interest rate and repayment schedule, are outlined in a loan agreement.
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