Loan

The document evidencing the debt (e.g., a promissory note) will normally specify, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and the date of repayment.

Acting as a provider of loans is one of the main activities of financial institutions such as banks and credit card companies.

A secured loan is a form of debt in which the borrower pledges some asset (i.e., a car, a house) as collateral.

The lender, usually a financial institution, is given security – a lien on the title to the property – until the mortgage is paid off in full.

In an indirect auto loan, a car dealership (or a connected company) acts as an intermediary between the bank or financial institution and the consumer.

Usually, the lending institution employs people (on a roll or on a contract basis) to evaluate the quality of pledged collateral before sanctioning the loan.

These may be available from financial institutions under many different guises or marketing packages: The interest rates applicable to these different forms may vary depending on the lender and the borrower.

Thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible.

The credit score of the borrower is a major component in underwriting and interest rates (APR) of these loans.

Credit card companies in some countries have been accused by consumer organizations of lending at usurious interest rates and making money out of frivolous "extra charges".

[11] Abuses can also take place in the form of the customer defrauding the lender by borrowing without intending to repay the loan.

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).