How does a bank loan work?

Answer 1

"Bank Loans" are when institutionalized communities offer you money, that you agree, if not guarantee, to give back.

Once you have a "Bank Loan", you have a set amount of money that you can use within the guidelines of the loan.

You must repay the loan, and the lender has every right to see that you use the loan as you described, when you asked for the loan.

Once you have the money, you will owe the bank a debt. In most cases, the debt incurs interest. This interest is considered a "Rate"; the "Rate" is usually a function of the community, but can be superseded by the government.

In any case you are required to repay the debt. In nearly every case you are required to repay the debt "plus interest". And in most cases, the interest is a function of the "Rate".

Many other factors may be considered, the chief factor being, your ability to pay back the debt, based on your net worth, your income, and your current holdings.

Once you have the loan (money), you are expected to pay it back according to the terms of your agreement with the lender. If it is a simple loan, You have agreed to pay back the amount you borrowed, in full plus interest, by a certain date.

A more complex, and yet common, version of the same loan is that the interest on the loan will fluctuate based on your ability to pay back the loan, and the "Rate" established by the community as it fluctuates. Eventually, altering the amount of money you must return to the lender.

Clinically, A "Bank Loan": is an amount of money you borrow from a bank, and agree to payback. The bank will establish a schedule, on which you will repay the loan. The schedule will normally include interest. Which means you will ultimately pay back more than you borrowed. It is the basic principle of how banks make money.