Types Of Loans And The Factors Which Effect Them
A loan is a type of debt. This article focuses exclusively on monetary loans, although, in practice, any material object might be lent. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.
The borrower initially does receive an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A loan is of the annuity type if the amount paid periodically (for paying off and interest together) is fixed.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 financial institutions. For other institutions, issuing of debt contracts such 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.
Assets have Four essential characteristics:
The probable future benefit involves a capacity, singly or in combination with other assets, in the case of profit oriented enterprises, to contribute directly or indirectly to future net cash flows, and, in the case of not-for-profit organizations, to provide services
The transaction or event giving rise to the entity's right to, or control of, the benefit has already occurred.It is not necessary, in the financial accounting sense of the term, for control of assets to the benefit to be legally enforceable for a resource to be an asset, provided the entity can control its use by other means.
It is important to understand that in an accounting sense an asset is not the same as ownership. In accounting, ownership is described by the term "equity," (see the related term shareholders' equity). Assets are equal to "equity" plus "liabilities."
A loan covenant is a condition in a commercial loan or bond issue that requires the borrower to fulfill certain conditions or which forbids the borrower from undertaking certain actions, or which possibly restricts certain activities to circumstances when other conditions are met.
Typically, violation of a covenant may result in a default on the loan being declared, penalties being applied, or the loan being called.Covenants may also be waived, either temporarily or permanently, usually at the sole discretion of the lender.
A good example for understanding Loan Covenants would be syndicate loans. Where several banks act as party to loans and borrower may be one or several.Financial institutions provide a service as intermediaries of the capital and debt markets. They are responsible for transferring funds from investors to companies, in need of those funds.
The presence of financial institutions facilitate the flow of monies through the economy. To do so, savings are pooled to mitigate the risk broughtovide funds for loans. Such is the primary means for depository institutions to develop revenue. Should the yield curve become inverse, firms in this arena will offer additional fee-generating services including securities underwriting, and prime brokerage.
Related Tags: internet, websites, research, activities, small, domain, low, minor, names, topics, priority, due, seldom, exception, numbe, tocreate, hundredsof, gave, relegated, muchthought
Mortgage Lenders in Canada.Speak to Mortgage Brokers in your area.
Your Article Search Directory : Find in ArticlesRecent articles in this category:
- The Worldwide Credit Crisis
Recently in the UK Lloyds TSB has merged with the HBOS group which includes the old Halifax b - Citigroup
Daily Market Commentary for November 24, 2008 from Millennium-Traders.ComA very important question - World Leaders
Daily Market Commentary for November 14, 2008 from Millennium-Traders.ComDuring the upcoming weeken - The New Face of Indian Banks
The assassination of former Prime Minister Mr. Rajiv Gandhi seized the entire country into a grievo - Daycare Center Loans - Current Conditions
With major national daycare center lenders like UPS and CIT now out until further notice, many chil - The Best and Newest Features of Internet (online) Banking
Do you still queue up in the bank to pay your credit card bills or patiently wait for your bank sta - Bristol County Savings Bank Names Roger A. Cabral a Vice President of Commercial Banking
DATELINE: TAUNTON, MA... Bristol County Savings Bank recently announced the appointment of Roger - Commercial Loan Business - Commercial Bankers Perspective
We get a lot of questions regarding the commercial loan business. Many are from our peers that wa - Finally a Much Relief for the Entrepreneurs After a Long Wait
If we have a close look at the financial sector comprising of Banking services in India, we would b - Ben Bernanke
Daily Market Commentary for October 15, 2008 from Millennium-Traders.ComFederal Reserve Chairman Be
Most viewed articles in this category:
- That Was Then This is Now: E-Commerce And Online Banking
It's hard to believe that not all that long ago - in the distant past - there was no such thing as - Bank Basics: A Short History of Financial Institutions
For centuries, banks have influenced the economies and politics of the world. Traditionally, banks - What Pisses Me Off About the Financial Meltdown of Lehman Brothers, Aig, Washington Mutual and Other Collapsing Businesses
Lehman Brothers went bankrupt, AIG is being bailed out by the Federal Government, the Fed is lookin - Bank Basics: Understanding the Various Types of Banks
Banking has changed in many ways through the centuries. The oldest forms of banking were often simp - Benefits and Disadvantages of Internet Banking
If you fit in to the generation that is habitual of sitting in front of computers and doing all yo - Are Your Finances Prepared to Weather an Unexpected Storm?
Hurricane Katrina taught some important lessons three years ago. Most importantly, preparedness whe - Basics Of Home And Commercial Mortgage
A mortgage is the pledging of a property to a lender as a security for a mortgage loan. While a mor - Finance
Finance :The main techniques and sectors of the financial industry: An entity whose income exceeds - Economic Crisis
Daily Market Commentary for September 24, 2008 from Millennium-Traders.ComEconomic stability of the - What to Look for in an Online Savings Account
Banking has never been so easy and convenient. With a variety of banking services now made availabl