loan

A loan is a type of debt. Like all debt instruments,
a loan entails the redistribution of financial assets
over time, between the lender and the borrower.

In a loan, the borrower initially receives or borrows
an amount of money, called the principal, from the
lender, and is obligated to pay back or repay an equal
amount of money to the lender at a later time. Typically,
the money is paid back in regular installments, or partial
repayments; in an annuity, each installment is the same
amount. The loan is generally provided at a cost, referred
to as interest on the debt, which provides an incentive for
the lender to engage in the loan. In a legal loan, each of
these obligations and restrictions is enforced by contract,
which can also place the borrower under additional
restrictions known as loan covenants. Although this
article focuses on monetary loans, in practice any material
object might be lent.

Acting as a provider of loans is one of the principal tasks
for financial institutions. For other institutions, issuing
of debt contracts such as bonds is a typical source of funding.