A Brief History of Loans

Loans have been around for hundreds of years, as every once in a while, people tend to need a little bit more money to get out of a difficult financial situation, or to purchase something that they cannot afford.

In finance, the term of loan represents the process of lending money from an organization, individual or entity, to another organization, entity or individual. Therefore, a loan is more or less a debt that is provided by an entity to another, at a set interest rate, alongside with a promissory note that is meant to showcase the amount of money being borrowed, the rate of interest that the parts have previously agreed on, but also repayment terms. A loan also legally entails what people often refer to as the reallocation of a subject’s assets for a specified period of time, agreed between the borrower and the lender.

Understanding the terms is also essential to make sure that you encounter no issues when it comes down to borrowing or lending money. Therefore, the borrower is the person who goes ahead and either borrows, or receives a certain amount of money, known as the principal, whereas the lender represents the person borrowing the money in the first place. Once the term ends, the borrower has to pay back an equal sum of money, topped off by a certain interest rate.

Most of the times, loans are provided at a cost, referred to as the interest rate, which goes ahead and provides lenders with an incentive, and a method of gaining something back after borrowing a certain person money. In legal loans, the obligations are all stipulated onto a contract that is both read and signed by both of the parts. In case the sum of money isn’t paid back on time, the lender may have the possibility to place the borrower under a variety of restrictions that are often referred to as loan covenants.

At this moment in time, there are numerous types of loans being offered on the market. The most popular ones include secured loans, unsecured loans, demand, subsidized, and concessional loans.

Secured loans

These are the loans where the borrower goes ahead and pledges one of their assets as collateral in case they cannot afford to pay back the funds.

Unsecured loans

These are the loans which aren’t secured against the assets of the borrower. Some of these loans may be offered by financial institutions, through features such as credit card debt, bank overdrafts, personal loans, peer-to-peer landing, corporate bonds etc. While the borrower doesn’t have to pledge with his assets, in case he refuses to pay, legal action will follow, which works by attempting to pursue execution against the assets that belong to the borrower.

Demand loans

These are generally short term loans, which do not have fixed dates for repaying back the funds, and tend to carry something known as a floating interest rate, which can vary based on numerous factors. Demand loans can be either secured or unsecured.

Subsidized loans

These are generally loans where the interest rates are either hidden or not present. One example would be educational loans in the United States, which do not carry about an interest rate, as long as the beneficiaries remain enrolled in the college.

Concessional loans

These are usually referred to as soft loans, and tend to be somewhat more generous when compared to the market loans, as they offer interest rates that are significantly lower when compared to the competition, and may also offer grace periods. These types of loans are usually made between governments, or even by lending companies to their employees.

Payday loans

These loans are meant for dealing with emergency situations, and are often offered with no credit-check, as long as a proof of income and proof of identity is offered to the payday loan agency, which is great news.

Judging by the types of loans outlined so far, it is important to note the fact that the target market varies for each type. While some are suitable for companies, others tend to be suitable to students, whereas others are meant for individuals. While some of the loans are quite flexible and can be accessed by anyone, it is important to carry out your own research, in order to determine whether that particular type of loan would be an advantage to you, or will put you at loss.

Based on everything that has been outlined so far, the data on loans is infinite, as there are numerous types of loans that people can secure, meant for dealing with various types of financial issues. Picking the right one will surely reduce the amount of interest that you need to pay, while also giving you numerous other benefits when compared to some of the other types of loans present on the market.

All about mortgage loans

Buying a house can turn out to be quite difficult in today’s world, considering the extremely high costs associated with owning property. This represents the main reason why so many people from all around the world choose mortgage loans. For those who do not know, mortgage loans represent funds which are used in order to buy real estate.

The main idea behind mortgage loans is that those who score one do not have to offer any assets as collateral, but rather the house itself. Based on this aspect, regardless of whether you are purchasing or constructing a house using a mortgage loan, in case of failing to pay the funds back alongside with the interest rate on time, then the institution that you have contracted the loan from, will get the legal ability to foreclose the house, and sell it in order to get their funds back.

Do keep in mind the fact that mortgage loans are not only used to purchase or construct houses, as people also have the possibility to contract a loan under the form of a large sum of money by placing their very own house as collateral in the contract. At this moment in time, mortgage loans are generally offered by a wide variety of financial institutions, including building societies, banks, credit unions and more. Arrangements meant to score the mortgage loan can be made either directly, or through third parties that may charge an additional commission for scoring a good prise.

It’s also worth keeping in mind the fact that when dealing with mortgage loans, the rights that the lender has over the property in question, in case the borrower becomes unable to pay, are higher when compared to the borrower’s rights. Because of this, some people believe that contracting a mortgage loan is quite dangerous, especially in case the funds are not needed to construct a new house, but rather for other purposes, and you decide to offer your house as collateral for the contract.
Understanding all of the terms associated with mortgage lending is essential to keeping yourself safe, and not losing your money, time and property.

Property

This term stands for the main, physical residence that is currently either being financed, or being signed as collateral. The form of ownership rangers from jurisdiction to jurisdiction.

Principal

This term stands for the original size of the loan, which can either contain, or not contain some of the other costs associated with the loan.

Mortgage

This term is used to describe the main security interest that the lender has in the property being signed off. With this in mind, it can entail certain restrictions referred to the way that the property can be used, and disposed of. Some of the possibilities include being obliged to buy both mortgage insurance and home insurance, but also the need to pay all the outstanding debt, before being allowed to sell the house and get some of your funds back.

Foreclosure

Foreclosure and repossession are the terms that describe the lender’s possibility to seize the property under specific circumstances from the borrower, if the funds haven’t been paid back, based on the contract signed by both parts. Mortgage loans are different from other types of loans because of the foreclosure possibility.

Redemption

This term is used to describe the final repayment of the funds that remain outstanding, and is also referred to as natural redemption under certain circumstances.

Completion

This term is normally used to refer to the legal completion of the mortgage contract, thus showcasing the beginning of the contract once it has been signed by both parts of the deal.

At this moment in time, mortgage loan types depend on several factors. Choosing the right type of mortgage can sometimes be quite difficult for the average individual, which is why it is normally considered wise to contract a mortgage expert who can guide you through the entire process, and help you pick the best option for your current scenario. When it comes down to contracting a mortgage loan, it is worth keeping in mind the interest fees, term of the loan, the payment amount alongside the frequency of the payments, and last but not least, the sum that you need to offer as prepayment, prior to being able to start off your construction on the house in question.

Based on everything that has been outlined so far, mortgage loans aren’t too complicated, yet it is always wise to carefully look at the terms and conditions, and make sure that you dispose of the funds needed to make your payments on time, hence avoiding foreclosure. For smart financial planning on mortgage loans, you can always get in touch with a personal accountant, or mortgage loan experts, which, in exchange for a fee or percentage of the total cost of the house/loan, will offer assistance meant to give you access to the best terms and conditions.

Loan sharks: what they are, and how they operate

At this moment in time, there are numerous strategies that you can use in order to get access to a loan. There may however be cases when you are in need of a large loan, yet your credit score isn’t high enough to make you eligible to get a loan from a legal provider, such as bank, or loan agency. This represents the main reason why some people may choose loan sharks.

For those who do not know, loan sharks represent either individuals or companies who offer loans at incredibly high prices. The term is sometimes also used to refer to those who carry out illegal lending activities, and are not legally represented as a company or individual offering loans, according to the laws in your jurisdiction. From a historical standpoint, it is worth mentioning that loan sharks have been known to tend to enforce repayment of the funds being offered through strategies, such as blackmail and even acts of violence. In history, loan sharks have been put somewhere at the edge of legality, as long as they do not use acts of violence, in order to enforce repayment of the money being borrowed.

The history of shark loans

Back in the 19th century, in the United States, the existence of low legal interest rates made small loans extremely unprofitable for banks and other financial institutions. This represents the main reason why shark loans appeared on the market, as they offered illegal loans of just about any sum, yet implemented considerably higher interest fees which were not legal. This made the lending contracts null, therefore the shark loans did not have any possibility to claim the funds back in court, thus the reason why they chose violence and blackmail, in order to pursue clients to hand their money back, alongside with their interest fees.

Additionally, shark loans were also very popular in the mafia, and for offering loans meant to be used for illegal activities. To put things better into perspective, on the black market, it is often quite difficult for an individual to get an actual, legal loan, considering the fact that many of their assets may be illegally-owned, whereas their credit score may also be fairly bad. Additionally, from time to time, banks also tend to ask customers what they plan on using their money on, hence another reason while those involved with illegal activities found, and continue to find it difficult to score actual legal loans. In the 19th and 20th century, where gangs and criminality in general were soaring, loan sharks found a great opportunity to make some extra money. The interest rates being charged were extremely high, whereas the terms of the loan, such as the payback time, were also suited to offer a great advantage to the lender, and a big disadvantage to the borrower.

Loan sharks were present throughout the world, but most accounts come from the United States, the United Kingdom, Ireland, Italy and a few more regions.

Loan sharks today

At this moment in time, loan sharks generally operate in a legally grey area, so while their activity is not completely illegal, they are under to continuous supervision of legal entities, hence the acts of violence have greatly been reduced. Regardless of this aspect, most of the times, it is recommended that those who are in need of emergency funds do not choose loan sharks without a good history behind them, but rather payday loans for emergency funds, and actual personal loans in case more money is needed for a longer period of time. While credit may definitely be an issue for some, there are numerous strategies that can be implemented to increase your credit score, and some of these, may only take a few months to fulfil. You are also in advantage in case you have a multitude of assets that you can sign as collateral when contracting a larger loan, which is equally great news even for those who don’t have excellent credit, yet are in need of a larger sum of money.

Based on everything that has been outlined so far, long ago, loan sharks were efficient, yet extremely difficult. Today, they are still around, yet their operations aren’t illegal anymore. If you do end up needing the services of a loan shark, make sure to choose a professional with positive reviews, and always be careful to not risk more than you can afford to lose. There are always other ways of getting access to money, without spending way too much on the interest rates, or risking your assets and properties.