A loan is actually a form of debt that is mentioned in a note. The note specifies the principal loan amount, the rate of interest and repayment tenure of the loan. The two principal parties involved in the transaction of a loan include the lender and the borrower. The borrower initially borrows or receives an amount of money known as the principle from the lender, and has an obligation of paying back the same amount of money to the lender within a mutually agreed period of time. This means that the loan amount is paid back in regular installments and each installment comprises the same amount of money. Any loan is generally provided at a certain cost that is known as the interest on the debt. This also serves as a sort of incentive for the lender to engage into the entire process. Loans are primarily categorized into secured and unsecured loans. Hide this