A bank loan is a financial product where a bank lends money to an individual or business for various purposes, such as purchasing a home, funding a business expansion, or covering personal expenses. The borrower agrees to repay the borrowed amount, known as the principal, along with interest over a specified period, which can range from a few months to several years.
These loans can take various forms, including personal loans, mortgages, and business loans. Each type typically has different conditions regarding interest rates, repayment schedules, and requirements for collateral. Interest rates may be fixed or variable, influencing the overall cost of the loan.
Bank loans play a crucial role in the economy by facilitating access to capital. They enable individuals and businesses to make significant purchases and investments that they might not afford outright. Additionally, loans contribute to economic growth by stimulating spending and investment, leading to job creation and increased demand for goods and services. Overall, bank loans serve as a vital tool for financial management and long-term planning in both personal and business contexts.
