What Is the Definition of a Bank Loan?

A bank loan is has many terms and conditions and can be used for a number of different purposes. There are many different types of loans and they have different qualifications. To get a loan you must meet a banks credit granting criteria. Each bank has their own rules, guidelines and qualifying factors. It's a good idea to contact several banks to see who has the most favorable terms and conditions.

Definition

A bank loan is an extension of credit, to a consumer or business, in the form of borrowed funds which has to be paid back with interest.

Time Frame

A bank loan can have different time frames such as 12, 24, 36, or even 360 months. If you make monthly payments for the entire term, on time, you will have paid back the entire loan including interest and principal.

Secured Loan

Some loans require you to have security such as an automobile or a home. If you don't make your payments the lender can repossess the car or foreclose on the home.

Interest Rate

There are several types of interest rates you can receive. Your interest rate could be variable or fixed. If the rate is variable your payments can increase if the rate increases.

Fees

If you get a mortgage loan you can incur a number of fees such as title search, appraisal, points, origination fees, application fees and inspection fees.