A loan is a kind of advance or is the lending of money from one individual, organization or entity to another individual, organization or entity, made with or without security. In the case of a loan the bank makes a lump sum payment to the borrower or credits his deposit account with the money advanced. It is given for a fixed period at an agreed rate of interest. Repayments may be made in installments or at the expiry of a certain period. The customer has to pay interest on the total amounts advanced whether he withdraws the money from his account or not. A loan once repaid in full or in part cannot be drawn again by the borrower unless the banker sanctions a fresh loan.
Category: Banking & Finance