The term loan is basically used to refer to debt. It is also an agreement between the lender (person who lends the money) and the borrower (person who borrows the money and agrees to pay for a certain span of time).
Loans are often classified into two categories. This includes the secured loan and the unsecured loans.
A secured loan is a type of loan where in the borrower promises a collateral for the loan. For instance, a borrower can use his or her car as loan collateral.
Mortgage loan is one of the most common types of secured loan. In this arrangement, the borrower borrows money from the lender which will be used to purchase a house or a property. The lender or the financial institution is given security in the form of house title. The lender will have the title until the mortgage is paid in full.
However, in cases where in the borrower can no longer pay the mortgage, the lender would have the legal right to repossess or sell the property until the amount leased is recovered.
The next type of loan is the unsecured loan. This loan usually comes in the form of a monetary loans such as credit card debts, bank over drafts, personal loans, and corporate bonds among many others.