What are Loans?
Loans are defined as any product, item, or service that is offered to an individual to substantiate the lack of sufficient possessions, assets, or monies required to obtain or purchase a product or service existing outside of respective means; the nature of Loans are inherent within the implicit expectation of repayments. An individual – known as a lender – who loans another individual – known as the borrower – any object of value can establish the conditions in which the loan in question must be repaid – this can include an expressed time frame, full or partial repayment, and any interested incurred contingent on the gross value of the loan itself.
Legal Terminology and Loans
Within the realm of legality surrounding Loans, the following terminology is not only common within the establishment of a loan, but also within its respective collection process:
Interest: Interest is defined as an expressed and established percentage of the gross value of a loan that is added to the full amount of repayment that is required for the satisfaction of a loan; interest can be accrued in a variety of methods, including the duration of repayment, as well as the initial, gross value of the loan in question
Default: The classification of Loans in default – or defaulted Loans – is defined as the failure to provide for repayment of the loan in question. Typically, loans will include pre-agreed conditions fashioning the repayment process; in the event that an individual is unable – or unwilling – to satisfy outstanding debt with regard to loans, those loans are considered to be in a state of default
Debt: Debt is classified as a financial circumstance in which the gross amount of outstanding monies, assets, or valued owed outweighs the gross value of assets, income, or monies in possession of that individual; debt is incurred as a result of the inability – or unwillingness – to satisfy the repayment of Loans
Surety Loans: Surety Loans are types of loans that are formulated with the addition of a third party in addition to borrower and the lender. Surety loans allow for heightened insurance with regard to the lender with regard to the reduction of the risk of failure to satisfy any or all loans. Surety Loans include the following:
The Principal is the entity who has received a loan
The Obligee is the entity who has disbursed the loan
The Surety – or guarantor – is the entity who has cosigned for the loan disbursed; in the event of the Principal’s failure to repay the loan, the responsibility of repayment will become that of the Surety
Loans, Debt, and Collection
In the event that a lender is unable to be repaid for loans disbursed, a variety of options exist within the methodology available to reduce the risk of financial loss:
Lenders in ownership of debt belonging to consumers who have incurred loans in default alert Collection Agencies with regard to defaulted loans; this can result in the negotiation – and subsequent – transfer or sale of a respective loan. This transaction allows the Collection Agency to become the legal, rightful owner of defaulted loans in question, thus making them responsible for arranging repayment
The creation of a contingency repayment plans for defaulted loans may facilitate the repayment of loans; this can take place through the institution of scheduled payments, the consolidation of the preexisting debt into a smaller – or more manageable amount, or a single, lump-sum settlement