Loans and Economics

A loan is an agreement between two parties such as individuals or organizations regarding debt owed to one person, party, or organization. The debt is usually of monetary value but items and property can also be used. There are many different types of loans; such as secured, unsecured, subsidized, demand, and concessional. However there are two main categories in which a loan can fall under, commercial or personal. All legal loans require clear, binding agreements between the borrower and the lender in which both parties are required to sign a contract that states the specifics of the loan. A loan covenant may be attached to the agreement which means that the individual or organization doing the borrowing, will be restricted from and/or prohibited from certain activities while the loan agreement is in effect. After precautionary steps are taken and lawyers are called, the contract will be signed. The principal rate of the loan will be given to the borrower. The interest rate and date of repayment will be known beforehand and usually notated in the contract. The borrower will be well aware of the interest rate and the repayment date.

Loans are most likely to be taken out of financial institutions, although banks are the most popular and accessible way to get a loan. Loans can be taken from other organizations or private parties and can range in the amount needed. Loans are widely used nowadays to put a down payment on a house, car or boat. In the case of students, loans can make college and other educational institutions more accessible. When a loan is agreed upon and the repayment plan is detailed, all that is left is to follow the contract.

Student loans are among the most complicated because of the duration and continuation of funds needed. Many people seem to hold the opinion that loans, especially student loans, are a drag on the economy because students can rarely hope to pay the money back.

The economy is a complicated system by which our urban society runs. And economics is the social science that attempts to understand and explain the relationships between society and the economy. Supply, demand, and consumption are the backbone of economics, and to many people they are the most observable facets of it. The study of economic activity is done in order to gain an understanding of the processes that govern each aspect of economics; such as the production, distribution, and the consumption of products and services. It is done in a way that attempts to understand how our consumer driven society works. Consumption is the demand of a product or service and supply refers to the quantity at which a company can provide that product or service. Demand refers to how much of a service or product a consumer will buy and at what price.

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