Understand the term loan before making an application
Loaning money means lending money from one entity or individual to another entity or individual. There are three components of a loan namely principal, number of years for which the loan is taken and the rate of interest. Lending loans is one of the primary functions of the bank and financial institutions. Loans can either be secured loans or unsecured loans. Loans that are lent against the security of an asset is called secured loans. Whereas, loans that are lent without any collateral security is called unsecured loans. Pledge is a type of secured loan where a borrower takes a loan on a Van pledge [รับจำนำรถตู้, which is the term in Thai].
Types of loans
There are many types of loan that is ruling the financial market. Some of the loans include home loans, vehicle loans, education loans, business loans, personal loans, etc. A home loan is taken with the intention of buying a house. A vehicle loan is issued to the borrower for buying a vehicle. Education loan is provided to finance the education of the student, upon completion of studies the student is required to repay the loan. A business loan is for business purposes. A personal loan is given for no specific purpose.
Important concepts of loan
- Income: Income is the main concept for lenders as there interest lies in the repayment of the loan. Hence, the financial institutions lending loans check the income of the borrower whether it is meeting the income requirement or not.
- Tenure: The time allowed to return the loan amount is called tenure. In case of default in repayment of loan within the allotted tenure, the bank is eligible to seize the collateral property.
- Interest: The term interest is the amount of money that is charged by the lender for providing a loan to the borrower. The rate of interest varies from loan to loan and from person to person depending on their credit scores.