Loan

Every loan has a few key parts. The principal is the amount borrowed. The interest rate sets the cost of borrowing. The term is how long you have to repay. The repayment schedule says how often and how much you pay. Some loans also have fees and conditions, such as penalties for paying late.

Loans come in many forms. Mortgages are used to buy property. Car loans finance vehicles. Personal loans can be used for many purposes. Student loans pay for education. Businesses take loans to buy equipment or expand.

Secured loans are backed by an asset the lender can take if you stop paying, such as a house or car. Unsecured loans have no such backing, so they usually carry higher interest rates.

The length of a loan affects its cost. Borrowing 10,000 at 8% over three years costs about 313 a month and about 1,280 in total interest. Over five years, the monthly payment falls to about 203, but total interest rises to about 2,170. Lower monthly payments usually mean paying more overall.