What is a loan?
Loan system The English word credit, derived from the Latin word ‘card’ (Sanskrit-Latin card), means debt in economics, but it means to trust in one person (organization) over another.
Loan in the form of loan or borrowing is the payment of money or goods based on the belief that the price will be refunded later. (What is a bank loan)
Most loans are, in fact, financial loans so that the creditor first lends a certain amount of money to the debtor and later repays the loan with interest. Again the term credit refers to the debt and the borrower’s ability to repay the loan.
The history of debt evolution is long. In the distant past, at the beginning of the farming and exchange economy, surplus farmers supplied cereals and seeds to deficit farmers. Later, they recovered the total dues by increasing the amount paid during the harvest season.
Since the introduction of monetary and economic transactions in goods and services, the system of buying and selling loans has been developing rapidly.
Banks and various types of non-banking financial institutions have been developing lending systems to meet the need for money to meet other requirements, in addition to cash loans or trade loans. However, those who have a unique role in developing the credit system are the local moneylenders, goldsmiths, and merchants.
Types of Loans
Loans come in many different forms. Several factors can differentiate the costs associated with them, along with their contractual terms.