Money can be borrowed. That means that you receive money from a lender (usually a bank).
If you are going to borrow money from a bank, a compensation ( interest ) is generally requested. The benefit is a certain percentage of the borrowed amount that must be paid for the loan of the money. This means that ultimately more has to be repaid than there is borrowed. It is the intention that a credit will be refunded in due course (the repayment). What is of course highly recommended is doing a so-called loan simulation. With this, you calculate the amount of the compensation for the amount you want to borrow and thanks to the simulation you get insight with which amount you have to take into account.
How can a bank lend money?
Banks have access to money that has been deposited by others in their custody. Those people would like to receive interest there. The bank can reimburse that interest if the bank can achieve a return on the deposited money. The bank can do this by lending the money.
Different types of loans:
A credit against mortgage collateral. Someone lends money to buy a house; the house serves as collateral. That person pays interest and repayment to the bank.
A loan against securities collateral.
A loan to a person to purchase things other than a home. Because the risk for this is more significant, since there is no collateral, the interest on a personal loan will be higher than the mortgage interest.
The amount is not fixed, money is withdrawn and repaid as needed.
Credit cards, also called credit cards, are cards that allow you to go into credit for a short period. Using credit cards ensures that the money is not directly debited from the bank account but usually only once a month. This gives you a temporary credit option.
A loan, mainly taken out by companies, which will only be repaid if the other creditors (including the conventional loans) have been paid out first. This increases the risk, and therefore the interest rate is also higher.
Typical of this is that it has to cover a limited period, for example, the time between the purchase of a new home, which therefore must first be paid, and the sale of the other house, of which the owner only later the money of can receive, in order to repay the bridging loan. Often, a mortgage mandate is used.
Borrow money from friends or relatives
If a small loan is taken out between two friends or family members, no interest will generally be paid. However, in significant cases, this will happen in many cases. When borrowing large amounts, it is advisable to record the rights and obligations in an agreement.