A crucial concept in finance is the loans. Loaning is the process of lending money to people who borrow them called debtors. Very seldom does a loan not include interest rates, for a key aspect in loaning is to lend money, and increase the value lent over a certain period of time. The original amount loaned or lent, is called the principal amount. Whether the principal amount starts small or big, it increases as time lapses.

For instance, we are familiar with the situation of banks loaning money to borrowers or entrepreneurs. Over time though, the original amount increases twofold or threefold, depending on the interest rate of the bank. The interest rate is the rate by which you multiply the original amount per unit of time that passes. Interest rates vary for different institutions-it is not only banks that lend money.

Commonly, borrowers pay the money borrowed in portions called installments. An installment is the amount one has to pay per unit of time, until the total given time has elapsed. Installments can also apply to purchases and not just loans. For instance, a consumer buys a car and opts to pay it in installments over a year, instead of fully paying it at the moment of purchase. In this way, the amount paid will usually be more expensive than the original price of the car. It can be noticed that loaning has the same concept whereby, as time passes, the original amount earned increases and has to be paid off regularly.

The more common form of loaning perhaps is our very own credit cards. Most commonly applicable to professionals who need to make expensive purchases every now and then, credit cards allow for the temporary borrowing of a big amount of money to be paid off regularly over a certain period of time.

There are however other types of loans. The subsidized loan is a loan that waits for the consumer to pay it before charging interest. Otherwise, it is an unsubsidized loan. Credit cards are under the unsubsidized type of loans as the borrowed money gains interest immediately upon purchase. Another type is the mortgage loan-familiar in the concept of purchasing houses. In a mortgage loan, the financial institution who lent the money is given security over the property purchased until the full mortgage is paid. Until then, the householder cannot fully claim the house as his.

It is very important for financiers, economists, businessmen and even common folk to understand this concept because it is the root of many financial struggles common today. Very often debtors find themselves too buried in debts that, they cannot anymore make their daily ends meet because of the monumental amount they have to pay each month.

Fortunately, for debtors, there are debt relief programs to help them solve their problems. Debt relief is all about helping the debtor pay off a huge debt through debt consolidation, settlement and management programs. The programs all offer services that will lower interest rate for the debt, negotiate with the creditors and establish a feasible budget for the debtor to avoid future heavy debts.

Author Bio: Troy Charles G. Burton is a financial analyst who enjoys writing about debt consolidation programs and Chicago debt consolidation as well as other financial services.

Category: Finances
Keywords: loans,solving loans,finance