A loan usually involves a lender, borrower, financial assets, interest, principal and security.

The borrower initially receives an amount of money from the lender, which they pay back.

Repayment of the loan is usually in regular installments, to the lender.

Loans are generally provided at a cost, referred to as interest on the debt. A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.

One of the principal tasks for financial institutions is to provide Loans for profit.

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.

A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan.

A mortgage loan is a very common type of debt instrument, used by many individuals to purchase a house. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security — a lien on the title to the house — until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.

In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter — often corresponding to the useful life of the car.