Loans Flashcards
What is a financial loan?
It is a debt contract entered into by two parties, an organization or an individual, through a note which states the principal amount, interest rate, the mode of payment including the date of the payment.
What can loans be classified as?
Secured loan or unsecured loan
What is a secured loan?
A loan granted to a borrower who gives the lender the right to take possession of pledged borrower’s asset in case the former failed to settle the obligation.
What is an unsecured loan?
It is a loan that is not protected in case the borrower failed to meet the terms of payment.
What are the two commonly transacted loans?
Business loan and consumer loan
What is a business loan?
It is a loan lent to business companies to fund their business operating costs.
What is a consumer loan?
It is a loan borrowed for the purpose of making personal or family purchases.
What is collateral?
It is an asset presented by the borrower that is pledged to be given to the lender in case the borrower defaulted on the loan or failed to pay back the loan.
What is a guarantor?
It is an individual who agrees to pay back a loan if the borrower fails to pay the loan on time.
What are documentations?
These are required in order to effect a loan.
What are the typical documentations required for a consumer loan borrower?
Copy of tax return and credit certificate.
What are the typical documentations required for a business loan borrower?
Tax return, credit certificate, and at least 3 recent consecutive financial statements duly accomplished by a certified public accountant.
What is amortization?
It is the process of paying a loan and its interest through series of regular equal payments.
What is a mortgage?
It is a type of secured loan that makes use of real property such as house or lot as collateral.
