A loan is borrowing a certain sum of money to use for a purchase or other personal or business purpose, with the promise by the borrower to repay the amount (with a specified interest charge) by way of payment in accordance with a prearranged schedule. Loan contracts are the formal documents that spell out the terms and agreements between the borrower and the home loan experts Melbourne .
Loans can be classified as Long term loans and Short term loans. Long term loans generally have a maturity longer than five years and whilst Short term loans normally have a maturity shorter than 2 years. The interest rate charged on the borrowed funds reflects the level of risk that the Home Loan Experts Melbourne assumes by providing the money. For example, the lender might give a higher rate of interest to a start-up company compared to an established company that has shown a good profit for several years.
Loans can also be distinguished through their characteristics.
Here’s a few of Home Loan Experts Melbourne ‘s Characteristics of Loans
Time to maturity
- Time to maturity is the length of the loan contract. The Loans are classified according to their maturity into short-term, intermediate-term and long-term debt. There is no right or wrong term, but the time to maturity is an important characteristic of a loan, especially in business. The term needs to take into account the capability of the borrower to meet the financial commitment over that term whilst still maintaining profitability.
Repayment Schedule
- Payments can generally be made at set intervals but may also require a lump sum payment at the end of the contract. The payment is generally comprised of two parts: the interest cost and the portion of the outstanding principal.
Interest
- Interest is the added cost of borrowing money. The interest rate that is charged by the lender can be explained by the Home Loan Experts Melbourne and it is important the household income is sufficient to cover these costs and any other expenses. The interest rate may be fixed for the term of the loan or variably adjusted to reflect the change of the market conditions over time.
Security
- Assets that are pledged as security against the loan are known as collateral. Credits that are backed by collateral are secured. For some loans, the assets that are purchased serve as the collateral whilst in other cases the borrower puts other assets including cash forward as collateral.
If you plan to apply for a home loan, Lending Specialists, the Home Loan Experts Melbourne will lead the way to a successful loan application process.
If you need advice for a home loan, business or commercial loan, self-managed super fund loan, or a vehicle or equipment finance loan, speak to a broker at Lending Specialists. We have a wealth of experience under our belt and a robust network to connect you to the right industry professional for the loan you need.
