A loan is a type of credit vehicle in which a sum of money is lent to another party in exchange for future repayment of the value or principal amount, plus interest or finance charges. Loans may be for a specific, one-time amount, or they may be available as an open-ended line of credit up to a specified limit. Loans come in many different forms including secured, unsecured, commercial, and personal loans.

Here are some key features of a loan:

• Principal: This is the amount of money borrowed from a lender.
• Interest: This is the cost of borrowing money, usually expressed as a percentage of the principal amount.
• Installment payments: Loans are usually repaid at a regular cadence, typically monthly, to the lender. Your monthly payment is commonly a fixed amount.
• Term: The loan term is how much time you have to repay the loan in full. Depending on the type of loan, the term can range from a few weeks to several years.

Loans can be given to individuals, corporations, and governments. The terms of a loan are agreed to by each party before any money or property changes hands or is disbursed. If the lender requires collateral, the lender outlines this in the loan documents. Loans are one of the basic building blocks of the financial economy, and they are used to finance a wide range of activities.