Loan
From ForcaWiki, the simple encyclopedia
| In one sentence | An agreement to borrow money that requires paying the lender back the full amount, plus interest, at some point in the future. |
|---|---|
| Category | Finance |
| Related | Debt, Interest, Collateral |
Imagine writing up a simple agreement with a friend: they hand you 20 dollars today, and you promise, in writing, to pay them back 22 dollars in exactly two months. That written promise, and everything it spells out, is a loan agreement.
A loan is exactly that agreement to borrow money, one that requires the borrower to pay the lender back the full amount they borrowed, plus Interest, at some agreed point in the future. Once the money is handed over, the borrower owes a Debt until the loan is fully paid back.
What a loan usually spells out
A loan agreement typically lays out exactly how much is being borrowed, how much interest will be charged, when it all needs to be paid back, and often what Collateral the lender is allowed to take if the borrower fails to pay. Movies are frequently financed with several different loans at once, each covering a different piece of the budget.
Fun facts
- A loan is really just one specific way of taking on debt. Not all debt comes from a formal loan, but every loan does create a debt.
- Movie loans come in several different specialized flavors, including loans made against presold distribution rights and gap loans made against territories that have not sold yet.
- Paying back a loan exactly on schedule helps a person or company borrow more easily the next time, since lenders remember who reliably pays them back.