Loans

A Loan is a type of advance in which barter grants a lump sum to the borrowers for a certain period at an agreed rate of interest.A Separate loan account is opened in the name of the borrower and the entire amount of the loan is debited to that account.The repayment of the loan can be made either in lump sum or by instalments.The interest is charged on the full amount of loan sanctioned whether he withdraw money from his account or not.

1)-Demand Loan

Loan is Payable on Demand Draft.Such Loans are generally granted for a short period.

2)-Term Loan

Term Loans may be medium term or long term.Loans granted for period ranging from
one year to five years.This type of loan is used to purchase machinery,equipments and
vehicle.

3)-bridge Loan

These are short term Loan which are generated to industrial establishments to meet
their urgent needs.

4)-composite Loan

When a loan is granted both for buying assets and for working purposes.


Advantages

A Banker can charge interest even on the un utilised part of the loan sanctioned.hence this
system of advance is more profitable.
The clerical and accounting work connected with loan is very little.
Periodic preview of loan is possible and un satisfactory loans can be discontinued.
The date of repayment loan is fixed in advance.This prompt the borrower to make the
repayment without default.

Disadvantage

The formalities to be combined with the sanctioning of a loan are complex and time consuming.

Generally loans are sanctioned for a fixed period.But in practice they have to be continusely
renewed frequently.

Loans are not flexible compared to other types of advances.All the formalities of sanctioning
a loan are to be repeated every time when a new loan is needed.

Banker cannot exercise any control over the utilisation of loan granted.

I will tell you more about Home loan,Property Loan,equity Loan,etc