Monday, August 29, 2011

What is loan?,& insurance

Posted by Muhammad Ashraf at 9:24 AM
Loan is an amount of money advanced to a borrower, to be repaid at a later date, usually with interest. legally, a loan is a contrat between a buyer (the borrower) and a seller (the lender), enforceable under the Uniform Commercial Code in most states. The terms and conditions for repayment of a loan, including the finance charge or interest rate, are specified in a loan agreement. a loan may be payable on demand (a Demand Loan), in equal monthly installments (an installments loan) It is also define as when a lender gives money or property to a borrower, and the borrower agrees to return the property or repay the borrowed money, along with interest, at a predetermined date in the furture.

Loan insurance is a popular type of insurance in very specific circumstances where a borrower is not sure if loan payments can be made on a continual basis. It is known by many different names in the United States and the UK, including payment protection insurance, accident sickness insurance, unemployment insurance (a specific type of unemployment insurance, this name is only used in the UK), and redundancy insurance. Loan insurance is not usually required by any lender, but many types of insurance companies offer it.


  • Loan insurance is bought as policy just like other types of insurance, but the policy only covers loans that the policyholder has. The insurance makes the loan payments on behalf of the policyholder, usually for a specific amount of time, such as six months or a year. This insurance often ignores personal factors such as age and health, since it depends more on financial criteria.


  • If the policyholder loses his job, becomes disabled, or is somehow unable to make payments, then he does not have to default on the loan. This very useful, because if payments are not made for a certain length of time then the lender can usually take legal action and seize assets to make up the payments. Loan insurance avoids this by having the insurance company make the loan payments when the policyholder cannot.

Types of Loans

  • Loan insurance is available for many types of loans, but it is generally used for home loans and car loans. These are the two largest loans that individuals are likely to have during their lives, which means they have the large payments that could be the most difficult to make. Mortgages are especially important, because the bank can take the property if payments cannot be made. Not only could the borrower lose her home, but her credit will be negatively affected.


  • Most loan insurance policies require a certain amount of time during which loan payments cannot be made in order for the policy to be activated. This helps ensure that the policyholder is really unable to make loan payments and is not temporarily out of work or struggling to bring enough funds together. After the 60 days, the insurance will begin making payments for up to 24 months, although a policy can be for less time.


  • While loan insurance does not depend on policyholder health or age (except for certain types of UK policies), it does depend on other factors, such as where the policyholder lives, the type of policy, and how long the coverage will last. Loan insurance should be bought separately from the loan itself to save money. A common loan insurance policy will charge several cents on every hundred dollars in the loan balance for each monthly premium.
                   (source by internet)
Read more: What Is Loan Insurance? |


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