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A loan is an agreement between two or more people where one side agrees to temporarily give money ("lend") to the other side in return for repayment plus some additional payment in the form of interest.

Expanded Definition

The "borrower," the person receiving the money, agrees to repay the lender over some period of time. In addition, the borrower also agrees to pay interest on the loan, to compensate the lender for the risk he takes in lending the money out.

Loans can take many shapes and can last for many different lengths of time. Basically, it is whatever the lender and the borrower agree to.

Loan types include:

  • Mortgages
  • Credit cards
  • Bonds

When investors deposit money into a savings account or a Certificate of Deposit (CD), they are lending that money to the bank and receive interest as payment for that.

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