Loan Loans : An Loan

1219 WordsAug 15, 20165 Pages
2.1.2 It is known that a bank makes a loan to a borrowing customer. The borrower needs to pay the principal back with interest. The process significantly creates a credit and a liability for both the bank and the borrower. So the borrower is credited with a deposit in account and incurs a liability for the amount of the loan. Apart from that, it could be predicted that an asset of banks should be equivalent to the amount of loans and a liability should be equal to deposits as well. If the bank’s assets and liabilities have grown, and so has the borrower’s. Moreover, loans are used not just by individuals but also organizations and even governments. In addition, loans can be divided into two categories: unsecured and secured loans. In general, unsecured loans include credit cards, which are more expensive than secured loans, but it is not risky if circumstances change. For instance, If a client fail to repay an unsecured loan, the lender 's only option is to meet the lawyers, but it may not result in payment. The interest rates for unsecured loans are usually higher. But as for a secured loan, it is secured over property .In some circumstances, if a customer fail to repay, the lender can recover the amount owed by forcing the sale of the secured property. Interest rates tend to be a bit lower. Banks issues loans to both people and companies. It can help people buy a home or start a business or for companies to make investments, for example, loans help corporations with

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