Loan
A loan is a type of debt. All material things can be lent but article focuses exclusively on monetary loans. Like all debt instruments, a loan entails hten redistribution of financial assets over time, the lender and the borrower.
The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.
Acting as a provider of loans is one of the principal tasks for financila institutions. For other institutions, issuing of debt contracts as bonds is a typical source of funding. Bank loans and credit are one way to increase the money supply.
Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money.
