Any person borrowing money (a loan) is referred to as the ‘debtor\' and the person lending the money is called the ‘creditor\'; this is a legal contract between the lender or creditor and the borrower or debtor. Lending money is the most usual reason but it can also include goods, services and even people but this article is dealing with those of a financial nature. The lender will expect full repayment of the amount borrowed within the time frame arranged when the money was lent; normally repaid in regular amounts, which can be on a monthly, but sometimes three monthly basis.

This service is generally provided at a cost, referred to as interest on the debt and it can vary how this is repaid. One type of arrangement is to have the interest paid off before the sum so the first few installments might only be the interest charges that have been added. However the normal way to repay a debt is to ensure that each monthly repayment combines part sum and part interest.

Most of the time, this is the only contact the majority of people have with financial companies and it is just one of many roles they have; although this is the most important. A loan is a simple way for many people and businesses to have a sum of disposable money in the bank (it\'s just the amounts that differ); other ways to raise capital are available but none as easy as this.

Long term financial arrangements designed for individuals and companies to buy real estate is called a mortgage but it can only be used for this purpose. As the amount involved is generally much greater, the financing company which owns the debt retains the titles to the property for the entirety of the mortgage, only releasing the title when the last payment is made. This is a much more serious type of situation and one where it is actually possible for the bank to foreclose on the loan if the borrower fails to make repayments; although selling the property is one option, keeping it as an investment is another.

In some instances, a loan taken out to purchase a new or used car may be secured on the car itself; if the person using the money to buy a car defaulted on the money used to purchase it, the car would be sold to repay the debt. To ensure that the finance company does not lose money, secured loans on cars are normally short term; where cars are concerned, this term will only last a handful of years.

The marketing companies are clever at disguising unsecured loans and the vast majority of people do not even realize they probably have them; if you have an overdraft or credit cards for example, this is exactly what these arrangements are. The interest rates vary with the lender and type of credit supplied but credit cards around the world have some of the highest rates of interest, whilst a bank overdraft will typically be much lower in comparison.

Abuse in the granting of money is known as predatory lending; it usually involves providing cash in order to put the borrower in a position where one can gain advantage over them. This is an area where credit card companies in some countries are also criticized as they supply cards at very high rates of interest and add on other spurious charges to the holder. Try to remember what has been written here and you might not have too many problems.

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