loan
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(lōn) 
n.
To lend.
n.
- Something lent for temporary use.
- A sum of money lent at interest.
- An act of lending; a grant for temporary use: asked for the loan of a garden hose.
- A temporary transfer to a duty or place away from a regular job: an efficiency expert on loan from the main office.
To lend.
[Middle English lan, lon, from Old Norse lān.]
loaner loan'er n.USAGE NOTE The verb loan is well established in American usage and cannot be considered incorrect. The frequent objections to the form by American grammarians may have originated from a provincial deference to British critics, who long ago labeled the usage a typical Americanism. Loan is, however, used to describe only physical transactions, as of money or goods; for figurative transactions, lend is correct: Distance lends enchantment. The allusions lend the work a classical tone.
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Money advanced to a borrower, to be repaid at a later date, usually with interest. Legally, a loan is a contract between a buyer (the borrower) and a seller (the lender), enforceable under the Uniform Commercial Code in most states. The terms and conditions for repayment of a loan, including the finance charge or interest rate, are specified in a loan agreement. A loan may be payable on demand (a Demand Loan), in equal monthly installments (an Installment Loan), or they may be good until further notice or due at maturity (a Time Loan).
There are various methods lenders use to categorize loans, both for internal control and for reporting lending activity to governmental agencies, for example, classification by maturity, industry, security, and type of borrower. Bank loans are normally classified by: (1) Commercial & Industrial Loans to business organizations; (2) interbank loans, which are mostly Federal Funds transactions, from one bank to another; (3) Loan Participations or loans to a single borrower shared by several banks; (4) real estate loans, which may be subdivided into construction loans and long-term Mortgage loans; and (5) loans to consumers, such as auto loans and other forms of consumer installment credit. See also Consumer Credit; Credit; Loan Participation; Parallel Loan; Secured Loan; Syndicated Loan; Term Loan; Time Loan; Unsecured Loan; Working Capital Loan.
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Offer of borrowed money. Agreement for debt financing.
See mortgage loan .
Example: The Wilsons used a mortgage to buy their home, a home equity loan to add a room, and an unsecured bank loan to buy new furniture.
See mortgage loan .
Example: The Wilsons used a mortgage to buy their home, a home equity loan to add a room, and an unsecured bank loan to buy new furniture.
| Load-Bearing Wall, Littoral | |
| Loan Application, Loan Application Fee |
Roget's Thesaurus:
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loan
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loan, in business, sum of money borrowed at a particular interest rate. More generally, it refers to anything given on condition of its return or repayment of its equivalent. A loan may be acknowledged by a bond, a promissory note, or a mere oral promise to repay. Because of biblical injunctions against usury, the early Christian church forbade the taking of interest. In feudal European society, loans were little needed by the great mass of relatively self-sufficient and noncommercial peasants and serfs, but kings, nobles, and ecclesiastics were heavy borrowers for personal expenditures. Merchants and other townsmen, especially the Jews, were the moneylenders, and various devices were found for circumventing the prohibition of usury. With the rise of a commercial society, restrictions on the taking of interest were gradually relaxed. Today, banks and finance companies make most loans, usually on collateral, such as stocks, personal effects, and mortgages on land and other property, or on assignments of wages. Credit unions have attained some importance in making personal loans at relatively low interest rates, and microcredit programs and organizations, which offer small-scale loans, have proved useful, particularly in developing countries, in helping individuals to establish small businesses. A pawnbroker lends money on the security of articles left in his shop.
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“delivery of a sum of money to another under a contract to return at some future time an equivalent amount with or without an additional sum agreed upon for its use; and if such be the intent of the parties the transaction will be deemed a loan regardless of its form” 428 P. 2d 190, 194. The characterization of a transaction as a loan or some other type of borrowing has significance in ascertaining whether usury laws apply to the amount of interest being charged.
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The act of giving money, property or other material goods to a another party in exchange for future repayment of the principal amount along with interest or other finance charges. A loan may be for a specific, one-time amount or can be available as open-ended credit up to a specified ceiling amount.
Investopedia Says:
The terms of a standardized loan are formally presented (usually in writing) to each party in the transaction before any money or property changes hands. If a lender requires any collateral, this will be stipulated in the loan documents as well. Most loans also have legal stipulations regarding the maximum amount of interest that can be charged, as well as other covenants such as the length of time before repayment is required.
Loans can come from individuals, corporations, financial institutions and governments. They are a way to grow the overall money supply in an economy as well as open up competition, introduce new products and expand business operations. Loans are a primary source of revenue for many financial institutions such as banks, as well as some retailers through the use of credit facilities.
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Word Tutor:
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loan
IN BRIEF: The act of lending. Also: A sum of money lent.
There is no greater loan than a sympathetic ear.
— Unknown
Tutor's tip: Another word that sounds like "loan" which means the act of lending, is "lone" which means solitary.
LearnThatWord.com is a free vocabulary and spelling program where you only pay for results!
Random House Word Menu:
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categories related to 'loan'
- Banking and Financial Services - loan: amount of money borrowed or lent on interest
See crossword solutions for the clue
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"borrower" redirects here. For other uses, see The Borrowers (disambiguation).
For other uses, see Loan (disambiguation).
| Finance |
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A loan is a type of debt. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.
In a loan, the borrower initially receives or borrows an amount of money, called the principal, from the lender, and is obligated to pay back or repay an equal amount of money to the lender at a later time. Typically, the money is paid back in regular installments, or partial repayments; in an annuity, each installment is the same amount.
The loan is generally provided at a cost, referred to as interest on the debt, which provides an incentive for the lender to engage in the loan. In a legal loan, each of these obligations and restrictions is enforced by contract, which can also place the borrower under additional restrictions known as loan covenants. Although this article focuses on monetary loans, in practice any material object might be lent.
Acting as a provider of loans is one of the principal tasks for financial institutions. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.
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Contents
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Types of loans
Secured
See also: Loan guarantee
A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral.
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter — often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer. An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
Unsecured
Unsecured loans are monetary loans that are not secured against the borrower's assets. These may be available from financial institutions under many different guises or marketing packages:
- credit card debt
- personal loans
- bank overdrafts
- credit facilities or lines of credit
- corporate bonds (may be secured or unsecured)
The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974.
Interest rates on unsecured loans are nearly always higher than for secured loans, because an unsecured lender's options for recourse against the borrower in the event of default are severely limited. An unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and then pursue execution of the judgment against the borrower's unencumbered assets (that is, the ones not already pledged to secured lenders). In insolvency proceedings, secured lenders traditionally have priority over unsecured lenders when a court divides up the borrower's assets. Thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible.
Demand
Demand loans are short term loans [1] that are atypical in that they do not have fixed dates for repayment and carry a floating interest rate which varies according to the prime rate. They can be "called" for repayment by the lending institution at any time. Demand loans may be unsecured or secured.
Subsidized
A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy. In the context of college loans in the United States, it refers to a loan on which no interest is accrued while a student remains enrolled in education.[2] Otherwise, it may refer to a loan on which an artificially low rate of interest (or none at all) is charged to the borrower.
An unsubsidized loan is a loan that gains interest at a market rate from the date of disbursement.
Target markets
Personal or commercial
See also: Credit_(finance)#Consumer_credit
Loans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business. Common personal loans include mortgage loans, car loans, home equity lines of credit, credit cards, installment loans and payday loans. The credit score of the borrower is a major component in and underwriting and interest rates (APR) of these loans. The monthly payments of personal loans can be decreased by selecting longer payment terms, but overall interest paid increases as well. For car loans in the U.S., the average term was about 60 months in 2009.[3]
Loans to businesses are similar to the above, but also include commercial mortgages and corporate bonds. Underwriting is not based upon credit score but rather credit rating.
Loan payment
The most typical loan payment type is the fully amortizing payment in which each monthly rate has the same value over time.[4]
The fixed monthly payment P for a loan of L for n months and a monthly interest rate c is: [5]
Abuses in lending
Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her. Where the moneylender is not authorized, they could be considered a loan shark.
Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organisations of lending at usurious interest rates and making money out of frivolous "extra charges".[6]
Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.
United States taxes
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This section needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (February 2012) |
Most of the basic rules governing how loans are handled for tax purposes in the United States are codified by both Congress (the Internal Revenue Code) and the Treasury Department (Treasury Regulations — another set of rules that interpret the Internal Revenue Code).[7] Yet such rules are universally accepted.[8]
1. A loan is not gross income to the borrower.[9] Since the borrower has the obligation to repay the loan, the borrower has no accession to wealth.[10]
2. The lender may not deduct (from own gross income) the amount of the loan.[11] The rationale here is that one asset (the cash) has been converted into a different asset (a promise of repayment).[12] Deductions are not typically available when an outlay serves to create a new or different asset.[13]
3. The amount paid to satisfy the loan obligation is not deductible (from own gross income) by the borrower.[14]
4. Repayment of the loan is not gross income to the lender.[15] In effect, the promise of repayment is converted back to cash, with no accession to wealth by the lender.[16]
5. Interest paid to the lender is included in the lender’s gross income.[17] Interest paid represents compensation for the use of the lender’s money or property and thus represents profit or an accession to wealth to the lender.[18] Interest income can be attributed to lenders even if the lender doesn’t charge a minimum amount of interest.[19]
6. Interest paid to the lender may be deductible by the borrower.[20] In general, interest paid in connection with the borrower’s business activity is deductible, while interest paid on personal loans are not deductible.[21] The major exception here is interest paid on a home mortgage.[22]
Income from discharge of indebtedness
Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness. [23] Thus, if a debt is discharged, then the borrower essentially has received income equal to the amount of the indebtedness. The Internal Revenue Code lists “Income from Discharge of Indebtedness” in Section 61(a)(12) as a source of gross income.
Example: X owes Y $50,000. If Y discharges the indebtedness, then X no longer owes Y $50,000. For purposes of calculating income, this should be treated the same way as if Y gave X $50,000.
For a more detailed description of the “discharge of indebtedness”, look at Section 108 (Cancellation of Debt (COD) Income) of the Internal Revenue Code.[24]
See also
- Finance, Personal finance, Settlement (finance)
- Debt, Consumer debt, Debt consolidation, Government debt
- Bank, Fractional-reserve banking, Building society
- Annual percentage rate (a.k.a. Effective annual rate)
- Default (finance)
- Interest-only loan, Negative amortization, PIK loan
- Leveraged loan
- Loan guarantee
- Loan sale
- Payday loan
- Refund Anticipation Loan
- Student loan
- Syndicated loan
- Title loan
- Legal financing
US specific:
- FAFSA
- Federal student loan consolidation
- Federal Perkins Loan
- George D. Sax and the Exchange National Bank of Chicago - Innovation of instant loans
- Stafford loan
- Student loan default
References
- ^ Signoriello, Vincent J. (1991), Commercial Loan Practices and Operations, ISBN 978-1-55520-134-0
- ^ Subsidized Loan - Definition and Overview at About.com. Retrieved 2011-12-21.
- ^ Bird C. Car Loans: How Long Should They Be?. Cars.com.
- ^ Guttentag, Jack (October 6, 2007). "The Math Behind Your Home Loan". The Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2007/10/05/AR2007100501165.html. Retrieved May 11, 2010.
- ^ http://www.mtgprofessor.com/formulas.htm
- ^ Credit card holders pay Rs 6,000 cr 'extra' May 3, 2007
- ^ Samuel A. Donaldson, Federal Income Taxation of Individuals: Cases, Problems and Materials, 2nd Ed. 111 (2007).
- ^ Id.
- ^ Id.
- ^ Id. See Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955)(giving the three-prong standard for what is "income" for tax purposes: (1) accession to wealth, (2) clearly realized, (3) over which the taxpayer has complete dominion).
- ^ Donaldson, at 111.
- ^ Id.
- ^ Id.
- ^ Id.
- ^ Id.
- ^ Id.
- ^ Id.; 26 U.S.C. 61(a)(4)(2007).
- ^ Id.
- ^ Id. at 112.
- ^ Id.
- ^ Id.
- ^ Id.
- ^ Id.; 26 U.S.C. 61(a)(12)(2007).
- ^ Id.; 26 U.S.C. 108(2007).
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This entry is from Wikipedia, the leading user-contributed encyclopedia. It may not have been reviewed by professional editors (see full disclaimer)
Translations:
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Loan
Dansk (Danish)
1.
n. - lån
v. tr. - låne
idioms:
- a loan of et lån på
- loan out udlåne
- loan shark lånehaj, ågerkarl
- on loan til låns, som et lån
2.
n. - udlån
Nederlands (Dutch)
lening, geldlening, het uitlenen, geleend woord/ gebruik, het geleende, laan, koeienmelkerij, (uit) lenen, ontlenen aan
Français (French)
1.
n. - (Fin) emprunt, prêt
v. tr. - prêter, prêter à
idioms:
- a loan of un emprunt de, un prêt de
- loan out prêter (à) (qn de l'argent)
- loan shark usurier, prêteur sur gages
- on loan prêter (ses services), être prêté à (un objet)
2.
n. - (Écosse, Nord de L'Angl.) chemin, petite route, lactarium
Deutsch (German)
1.
n. - Anleihe, Darlehen, Leihgabe
v. - leihen, verleihen
idioms:
- a loan of das Leihen
- loan out ausleihen
- loan shark Kredithai
- on loan geliehen, verliehen
2.
n. - Melkstelle, Gasse
Ελληνική (Greek)
v. - δανείζω/-ομαι
n. - δάνειο, δανεισμός
idioms:
- a loan of δανεικό
- loan out δανείζω
- loan shark τοκογλύφος
- on loan δανεικός
Italiano (Italian)
prestare, prestito
idioms:
- a loan of un prestito di
- be on loan essere a prestito
- loan out prestare
- loan shark usuraio
Português (Portuguese)
v. - emprestar
n. - empréstimo (m) (Fin.)
idioms:
- a loan of empréstimo
- loan out emprestar de
- loan shark agiota (m) (f) (Fin.)
- on loan pegar emprestado
Русский (Russian)
давать взаймы, брать взаймы, ссуда, что-л. данное во временное пользование, выдача книг, заимствование
idioms:
- a loan of заем чего-л.
- be on loan быть во временном пользовании
- loan out ссужать
- loan shark ростовщик
Español (Spanish)
1.
n. - préstamo, empréstito
v. tr. - prestar
idioms:
- a loan of un préstamo de
- loan out prestar
- loan shark usurero
- on loan prestado, a préstamo
2.
n. - cesión
Svenska (Swedish)
v. - låna ut
n. - lån, kredit
中文（简体）(Chinese (Simplified))
贷款, 债权人, 借出, 贷与
idioms:
- a loan of ...的贷款
- loan out 贷出, 借给...
- loan shark 放高利贷者
- on loan 借贷
中文（繁體）(Chinese (Traditional))
n. - 貸款, 債權人, 借出
v. tr. - 借出, 貸與
idioms:
- a loan of ...的貸款
- loan out 貸出, 借給...
- loan shark 放高利貸者
- on loan 借貸
한국어 (Korean)
1.
n. - 대여물, 대부금, 빚, 대여
v. tr. - 빌려주다, 이자를 붙여 대부하다
idioms:
- a loan of 대부
- loan out 빌려주다
2.
n. - 차용어, 외래어, 외래풍속
日本語 (Japanese)
n. - 貸付け, 融資, 貸借物, 一時的義務, 外来の風習, 貸し付け
v. - 貸し付ける
idioms:
- a loan of 貸付金, 公債
- be on loan 貸し付けて, 借り入れて
- bridging loan つなぎの融資
- loan out 貸す
- loan shark 高利貸し
- loan translation 翻訳借用
العربيه (Arabic)
(فعل) يقرض, يعير (الاسم) قرض بفائدة, شئ معار, إعارة, كلمه دخيله
עברית (Hebrew)
n. - הלוואה, מילווה, השאלה
v. tr. - השאיל, הילווה
n. - נתיב, שביל צר, מקום רחב לחליבת פרות
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This article is licensed under the Creative Commons Attribution/Share-Alike License. It uses material from the Wikipedia article Loan.
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