Loans

Have you ever wondered what exactly a loan is and how it works? A loan is an agreement between a lender and a borrower: the lender provides a sum of money in exchange for an interest rate and a set period to repay it.

Key concepts

• Principal: the original amount you borrow.
• Interest rate: the cost of borrowing, expressed as a percentage.
• Term: the agreed time to repay the money.
• Payment: the periodic payment that combines principal and interest.

Types of loans

There are different types depending on their purpose: personal, mortgage, auto, and student loans, among others. Each has its own conditions and requirements and is used for different needs.

How is interest determined?

Interest depends on several factors: your credit history, the amount, the term, and market rates. The stronger your credit profile, the lower the rate you're typically offered — which reduces the total cost of the loan.

A well-understood loan is a tool; a poorly understood one can become a burden. Knowing its parts lets you decide with confidence.