A loan is a type of debt.

All Lending weather big or small involves the following requirement. In order to qualify for a loan you must meet at least 2 of the 3 requirements but if you are really strong in any one area you may only need one.

• Ability to repay the loan - This refers to the cash flow of the borrower. Meaning how much cash do you have after the end of each period to make your repayment after all other debts have been paid. Not after all other expenses have been made but after all ofther debt obligations have been met.
• Willingness to repay the loan - This is commonly refered to as your credit rating or FICO score. Every individual and business has a credit rating. This rating is based on a set of criteria that is not fully know to even the people at FairIsaac and Co. The reason is that they use a statistical methodology that is based on Basian algorithums. But the basic criteria is based on what loans have you had in the past and were you able to repay those loans in a timly manor.
• Asset coverage if you do not repaythe loan - this means that bank or lendor will want you to give them some security in case you are unable to pay back the loan. In most cases this security comes in the form of the asset that you are aquireing with the money form the loan. However, contary to popular belief Banks are not in the business of reselling realestate. For this reason they will try to determine that the asset can be resold for and then they discount it by the maount of overhead it will take to sell it off. If you do not have asset coverage you will need to be stronger in the other 2 areas or the lender will simply mitigate their risk by charging higher interest rates on a portfolio of risky lenders.

All material things can be lent but this article focuses exclusively on monetary loans. Like all debt instruments, a loan entails the redistribution of financial assets over time, between the lender and the borrower.

The borrower initially receives an amount of money from the lender, which they pay back, usually but not always in regular installments, to the lender. This service is generally provided at a cost, referred to as interest on the debt. A borrower may be subject to certain restrictions known as loan covenants under the terms of the loan.

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.

Bank loans and credit are one way to increase the money supply. Legally, a loan is a contractual promise of a debtor to repay a sum of money in exchange for the promise of a creditor to give another sum of money.

Mortgage loan is the generic term for a loan secured by a mortgage on real property; the "mortgage" refers to the legal security, but the terms are often used interchangeably to refer to the mortgage loan. Mortgage loans generally refer to a loan secured by residential property, often for the purpose of acquiring the residence.

Mortgage loans may be lower priced than other forms of borrowing because the value of the property reduces risk for the lender. Mortgage lending is the primary mechanism used in many countries to finance private ownership of residential property.

For commercial mortgages see the separate article. Although the terminology and precise forms will differ from country to country, the basic components tend to be similar:

• Property: the physical residence being financed. The exact form of ownership will vary from country to country, and may restrict the types of lending that are possible.
• Mortgage: the security created on the property by the lender, which will usually include certain restrictions on the use or disposal of the property (such as paying any outstanding debt before selling the property).
• Borrower: the person borrowing who either has or is creating an ownership interest in the property.
• Lender: any lender, but usually a bank or other financial institution.
• Principal: the original size of the loan, which may or may not include certain other costs; as any principal is repaid, the principal will go down in size.
• Interest: a financial charge for use of the lender's money.
• Foreclosure or repossession: the possibility that the lender has to foreclose, repossess or seize the property under certain circumstances is essential to a mortgage loan; without this aspect, the loan is arguably no different from any other type of loan.

Many other specific characteristics are common to many markets, but the above are the essential features.

Governments usually regulate many aspects of mortgage lending, either directly (through legal requirements, for example) or indirectly (through regulation of the participants or the financial markets, such as the banking industry), and often through state intervention (direct lending by the government, by state-owned banks, or sponsorship of various entities). Other aspects that define a specific mortgage market may be regional, historical, or driven by specific characteristics of the legal or financial system.