A loan is an agreement between and lender and a borrower in which a lender agrees to provide funding, property or material goods to a borrower in exchange for repayment of principal and interest at a later date.
Loans can be considered secured or unsecured. A secured loan stipulates that a borrower agrees to post collateral that is available to a lender in the event the borrower is unable to repay the loan in the specified, agreed upon period of time. Secured loans include mortgages and car loans.
Unsecured loans include credit card loans that are not backed by any collateral. Limits on credit card loans are primarily a function of an individual’s credit score, which is a universal measure of that individual’s proven history of repaying his or her debt obligations in a timely manner.