loan application form definition - StatementEssaydatesCom

loan application form definition

Loan

From Wikipedia, the free encyclopedia

Jump to navigation
Jump to search

For other uses, see Loan (disambiguation) .
Finance
Philippine-stock-market-board.jpg
Markets
  • Bond
  • Commodity
  • Derivatives
  • Foreign exchange
  • Money
  • Over-the-counter
  • Private equity
  • Real estate
  • Spot
  • Stock
Participants
  • Investor
    • institutional
  • Retail
  • Speculator
Instruments
  • Bond
  • Cash
  • Collateralised debt obligation
  • Credit default swap
  • Time deposit ( certificate of deposit )
  • Credit line
  • Deposit
  • Derivative
  • Futures contract
  • Indemnity
  • Insurance
  • Letter of credit
  • Loan
  • Mortgage
  • Option  ( call
  • exotic
  • put )
  • performance bonds
  • Repurchase agreement
  • Stock
  • Security
  • Syndicated loan
  • Synthetic CDO
Corporate
    • Accounting
    • Audit
    • Capital budgeting
  • Credit rating agency
    • Risk management
    • Financial statement
  • Leveraged buyout
  • Mergers and acquisitions
    • Structured finance
    • Venture capital
Personal
  • Credit  / Debt
  • Employment contract
  • Financial planning
    • Retirement
    • Student loan
Public
Government spending
  • Final consumption expenditure
    • Operations
    • Redistribution
  • Transfer payment
Government revenue
    • Taxation
    • Deficit spending
    • Budget  ( balance )
    • Debt
  • Non-tax revenue
  • Warrant of payment
Banks and banking
  • Central bank
  • Deposit account
  • Fractional-reserve banking
  • Loan
  • Money supply
  • Lists of banks
Bank regulation
  • Banking license
  • Basel Accords
  • Bank for International Settlements
  • Financial Stability Board
  • Deposit insurance
  • Separation of investment and retail banking
Regulation  · Financial law
  • International Financial Reporting Standards
  • ISO 31000
  • Professional certification
  • Fund governance
Economic history
  • Private equity and venture capital
  • Recession
  • Stock market bubble
  • Stock market crash
  • Accounting scandals
  • v
  • t
  • e
Part of a series on financial services
Banking
Types of banks
  • Advising
  • Banq
  • Central
  • Commercial
  • Community development
  • Cooperative
  • Credit union
  • Custodian
  • Depository
  • Direct
  • Export credit agency
  • Investment
  • Industrial
  • Merchant
  • Mutual savings
  • National
  • Offshore
  • Participation
  • Postal savings
  • Private
  • Public
  • Retail
  • Savings
  • Savings and loan
  • Universal
  • Bank holding company

Lists of banks

Accounts  · Cards
Accounts
  • Christmas club
  • Deposit
  • Money-market
  • Savings
  • Time deposit (Bond)

Transaction (checking / current)

Cards
  • ATM
  • Credit
  • Debit
Funds transfer
  • Electronic
    • bill payment
  • Wire
  • Cheque
  • SWIFT
  • Automated Clearing House
  • Giro
Terms
  • Automated teller machine
  • Bank regulation
  • Loan
  • Money creation
  • Bank secrecy
  • Ethical banking
  • Fractional-reserve banking
  • Islamic banking
  • Private banking
Related topics
Financial market  ( participants )

  • Corporate finance
  • Personal finance
  • Public finance
  • Financial law
  • Financial regulation
  • List of banks
  • v
  • t
  • e

In finance , a loan is the lending of money by one or more individuals, organizations, and/or other entities to other individuals, organizations etc. The recipient (i.e. the borrower) incurs a debt, and is usually liable to pay interest on that debt until it is repaid, and also to repay the principal amount borrowed.

The document evidencing the debt, e.g. a promissory note , will normally specify, among other things, the principal amount of money borrowed, the interest rate the lender is charging, and date of repayment. A loan entails the reallocation of the subject asset (s) for a period of time, between the lender and the borrower .

The interest 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 main activities of financial institutions such as banks and credit card companies. For other institutions, issuing of debt contracts such as bonds is a typical source of funding.

Contents

  • 1 Types of loans
    • 1.1 Secured
    • 1.2 Unsecured
    • 1.3 Demand
    • 1.4 Subsidized
    • 1.5 Concessional
  • 2 Target markets
    • 2.1 Personal
    • 2.2 Commercial
  • 3 Loan payment
  • 4 Abuses in lending
  • 5 United States taxes
    • 5.1 Income from discharge of indebtedness
  • 6 See also
  • 7 References

Types of loans[ edit ]

Secured[ edit ]

See also: Loan guarantee

In a secured loan is a loan in which the borrower pledges some asset (e.g. a car or house) as collateral .

A mortgage loan is a very common type of loan, used by many individuals to purchase residential property. The lender, usually a financial institution, is given security – a lien on the title to the property – until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.

Similarly, a loan taken out to buy a car may be secured by the car. The duration of the loan is much shorter – often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. In a direct auto loan, a bank lends the money directly to a consumer. In an indirect auto loan, a car dealership (or a connected company) acts as an intermediary between the bank or financial institution and the consumer.

Unsecured[ edit ]

Unsecured loans are monetary loans that are not secured against the borrower’s assets. These may be available from financial institutions under many different guises or marketing packages:

  • credit card debt
  • personal loans
  • bank overdrafts
  • credit facilities or lines of credit
  • corporate bonds (may be secured or unsecured)
  • peer-to-peer lending

The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law. In the United Kingdom, when applied to individuals, these may come under the Consumer Credit Act 1974 .

Interest rates on unsecured loans are nearly always higher than for secured loans because an unsecured lender’s options for recourse against the borrower in the event of default are severely limited, subjecting the lender to higher risk compared to that encountered for a secured loan. An unsecured lender must sue the borrower, obtain a money judgment for breach of contract, and then pursue execution of the judgment against the borrower’s unencumbered assets (that is, the ones not already pledged to secured lenders). In insolvency proceedings, secured lenders traditionally have priority over unsecured lenders when a court divides up the borrower’s assets. Thus, a higher interest rate reflects the additional risk that in the event of insolvency, the debt may be uncollectible.

Demand[ edit ]

Demand loans are short-term loans [1] that typically do not have fixed dates for repayment. Instead, demand loans carry a floating interest rate which varies according to the prime lending rate or other defined contract terms. Demand loans can be “called” for repayment by the lending institution at any time. Demand loans may be unsecured or secured.

Subsidized[ edit ]

A subsidized loan is a loan on which the interest is reduced by an explicit or hidden subsidy . In the context of college loans in the United States , it refers to a loan on which no interest is accrued while a student remains enrolled in education. [2]

Concessional[ edit ]

A concessional loan, sometimes called a “soft loan”, is granted on terms substantially more generous than market loans either through below-market interest rates, by grace periods or a combination of both. [3] Such loans may be made by foreign governments to developing countries or may be offered to employees of lending institutions as an employee benefit (sometimes called a perk).

Target markets[ edit ]

Loans can also be subcategorized according to whether the debtor is an individual person (consumer) or a business.

Personal[ edit ]

See also: Credit (finance) § Consumer credit

Common personal loans include mortgage loans , car loans, home equity lines of credit, credit cards , installment loans and payday loans . The credit score of the borrower is a major component in and underwriting and interest rates ( APR ) of these loans. The monthly payments of personal loans can be decreased by selecting longer payment terms, but overall interest paid increases as well. [4] .

Commercial[ edit ]

Main article: Business loan

Loans to businesses are similar to the above, but also include commercial mortgages and corporate bonds . Underwriting is not based upon credit score but rather credit rating .

Loan payment[ edit ]

The most typical loan payment type is the fully amortizing payment in which each monthly rate has the same value over time. [5]

The fixed monthly payment P for a loan of L for n months and a monthly interest rate c is:




P
=
L




c

(
1
+
c

)

n




(
1
+
c

)

n



1





\displaystyle P=L\cdot \frac c\,(1+c)^n(1+c)^n-1

For more information see Compound interest#Monthly amortized loan or mortgage payments .

Abuses in lending[ edit ]

Predatory lending is one form of abuse in the granting of loans. It usually involves granting a loan in order to put the borrower in a position that one can gain advantage over him or her; subprime mortgage-lending [6] and payday-lending [7] are two examples,where the moneylender is not authorized or regulated , the lender could be considered a loan shark .

Usury is a different form of abuse, where the lender charges excessive interest. In different time periods and cultures the acceptable interest rate has varied, from no interest at all to unlimited interest rates. Credit card companies in some countries have been accused by consumer organizations of lending at usurious interest rates and making money out of frivolous “extra charges”. [8]

Abuses can also take place in the form of the customer abusing the lender by not repaying the loan or with an intent to defraud the lender.

United States taxes[ edit ]

Most of the basic rules governing how loans are handled for tax purposes in the United States are codified by both Congress (the Internal Revenue Code) and the Treasury Department (Treasury Regulations – another set of rules that interpret the Internal Revenue Code). [9] :111

1. A loan is not gross income to the borrower. [9] :111 Since the borrower has the obligation to repay the loan, the borrower has no accession to wealth. [9] :111 [10]

2. The lender may not deduct (from own gross income) the amount of the loan. [9] :111 The rationale here is that one asset (the cash) has been converted into a different asset (a promise of repayment). [9] :111 Deductions are not typically available when an outlay serves to create a new or different asset. [9] :111

3. The amount paid to satisfy the loan obligation is not deductible (from own gross income) by the borrower. [9] :111

4. Repayment of the loan is not gross income to the lender. [9] :111 In effect, the promise of repayment is converted back to cash, with no accession to wealth by the lender. [9] :111

5. Interest paid to the lender is included in the lender’s gross income. [9] :111 [11] Interest paid represents compensation for the use of the lender’s money or property and thus represents profit or an accession to wealth to the lender. [9] :111 Interest income can be attributed to lenders even if the lender doesn’t charge a minimum amount of interest. [9] :112

6. Interest paid to the lender may be deductible by the borrower. [9] :111 In general, interest paid in connection with the borrower’s business activity is deductible, while interest paid on personal loans are not deductible. [9] :111The major exception here is interest paid on a home mortgage. [9] :111

Income from discharge of indebtedness[ edit ]

Although a loan does not start out as income to the borrower, it becomes income to the borrower if the borrower is discharged of indebtedness. [9] :111 [12] Thus, if a debt is discharged, then the borrower essentially has received income equal to the amount of the indebtedness. The Internal Revenue Code lists “Income from Discharge of Indebtedness” in Section 61(a)(12) as a source of gross income .

Example: X owes Y $50,000. If Y discharges the indebtedness, then X no longer owes Y $50,000. For purposes of calculating income, this is treated the same way as if Y gave X $50,000.

For a more detailed description of the “discharge of indebtedness”, look at Section 108 ( Cancellation of Debt (COD) Income ) of the Internal Revenue Code . [13] [14]

See also[ edit ]

  • 0% finance
  • Annual percentage rate (a.k.a. Effective annual rate )
  • Auto loan
  • Bank , Fractional-reserve banking , Building society
  • Debt , Consumer debt , Debt consolidation , Government debt
  • Default (finance)
  • Finance , Personal finance , Settlement (finance)
  • Interest-only loan , Negative amortization , PIK loan
  • Legal financing
  • Leveraged loan
  • Loan guarantee
  • Loan sale
  • Pay it forward
  • Payday loan
  • Refund Anticipation Loan
  • Sponsored repayment
  • Student loan
  • Syndicated loan
  • Title loan

US specific:

  • FAFSA
  • Federal student loan consolidation
  • Federal Perkins Loan
  • George D. Sax and the Exchange National Bank of Chicago – Innovation of instant loans
  • Stafford loan
  • Student loan default

References[ edit ]

  1. ^ Signoriello, Vincent J. (1991), Commercial Loan Practices and Operations, ISBN   978-1-55520-134-0  
  2. ^ Subsidized Loan – Definition and Overview at About.com . Retrieved 2011-12-21.
  3. ^ Concessional Loans, Glossary of Statistical Terms , oecd.org , Retrieved on 5/5/2013
  4. ^ “Average new-car loan a record 65 months in fourth quarter” . Reuters. August 6, 2017. Retrieved 2017-08-06. 
  5. ^ Guttentag, Jack (October 6, 2007). “The Math Behind Your Home Loan” . The Washington Post. Retrieved May 11, 2010. 
  6. ^ “Predators try to steal home” . money.cnn.com. [CNN]. 18 Apr 2000. Retrieved 7 Mar 2018. 
  7. ^ Horsley, Scott; Arnold, Chris (2 Jun 2016). “New Rules To Ban Payday Lending ‘Debt Traps” . National Public Radio . Retrieved 7 Mar 2018. 
  8. ^ “Credit card holders pay Rs 6,000 cr ‘extra” . The Financial Express (India). Chennai, India]. 3 May 2007. Archived from the original on 2007. 
  9. ^ a b c d e f g h i j k l m n o p Samuel A. Donaldson, Federal Income Taxation of Individuals: Cases, Problems and Materials, 2nd Ed. (2007).
  10. ^ See Commissioner v. Glenshaw Glass Co., 348 U.S. 426 (1955) (giving the three-prong standard for what is “income” for tax purposes: (1) accession to wealth, (2) clearly realized, (3) over which the taxpayer has complete dominion).
  11. ^ 26 U.S.C. 61(a)(4)(2007).
  12. ^ 26 U.S.C. 61(a)(12)(2007).
  13. ^ 26 U.S.C. 108(2007).
  14. ^ EUGENE A. LUDWIG AND PAUL A. VOLCKER, 16 November 2012 Banks Need Long-Term Rainy Day Funds
  • v
  • t
  • e
Debt
Instruments
Bonds
  • Corporate
  • Debenture
  • Government
  • Municipal
Loans
  • Business loan
  • Consumer lending
  • Loan shark
  • Payday loan
  • Predatory lending
  • Usury
  • Vendor finance
Management
  • Bankruptcy
  • Consolidation
  • Management plan
  • Relief
  • Restructuring
  • Debt-snowball method
  • Debtor-in-possession (DIP) financing
  • Loan guarantee
Collection  · Evasion
  • Bad debt
  • Charge-off
  • Collection agency
  • Compliance
  • Debt bondage
  • Debtors’ prison
  • Distraint
  • Garnishment
  • Phantom debt
  • Strategic default
  • Tax refund interception
Markets
  • Consumer
  • Corporate
  • Government
  • Municipal
  • Venture
  • Buyer
  • Deposit account
  • Fixed income
  • Money market
  • Securitization
Economics
  • Consumer leverage ratio
  • Debt levels and flows
  • External  / Internal  / Odious debt
  • Default
  • Insolvency
  • Interest
  • Interest rate

Retrieved from ” https://en.wikipedia.org/w/index.php?title=Loan&oldid=855436431 ”
Categories :

  • Loans
  • Banking terms

Navigation menu

Personal tools

  • Not logged in
  • Talk
  • Contributions
  • Create account
  • Log in

Namespaces

  • Article
  • Talk

Variants

    Views

    • Read
    • Edit
    • View history

    More


      Navigation

      • Main page
      • Contents
      • Featured content
      • Current events
      • Random article
      • Donate to Wikipedia
      • Wikipedia store

      Interaction

      • Help
      • About Wikipedia
      • Community portal
      • Recent changes
      • Contact page

      Tools

      • What links here
      • Related changes
      • Upload file
      • Special pages
      • Permanent link
      • Page information
      • Wikidata item
      • Cite this page

      Print/export

      • Create a book
      • Download as PDF
      • Printable version

      In other projects

      • Wikimedia Commons

      Languages

      • العربية
      • Asturianu
      • Azərbaycanca
      • Беларуская
      • Беларуская (тарашкевіца)‎
      • Català
      • Čeština
      • ChiShona
      • Cymraeg
      • Dansk
      • Deutsch
      • Eesti
      • Ελληνικά
      • Español
      • Esperanto
      • Euskara
      • فارسی
      • Français
      • Frysk
      • Galego
      • 한국어
      • Հայերեն
      • Bahasa Indonesia
      • Íslenska
      • Italiano
      • עברית
      • ಕನ್ನಡ
      • Қазақша
      • Latina
      • Latviešu
      • Lietuvių
      • मराठी
      • مصرى
      • Nederlands
      • नेपाली
      • नेपाल भाषा
      • 日本語
      • Norsk
      • Norsk nynorsk
      • پښتو
      • Polski
      • Português
      • Română
      • Русский
      • Scots
      • Simple English
      • Slovenčina
      • Slovenščina
      • Српски / srpski
      • Srpskohrvatski / српскохрватски
      • Suomi
      • Svenska
      • Tagalog
      • Татарча/tatarça
      • ไทย
      • Українська
      • اردو
      • Tiếng Việt
      • ייִדיש
      • 粵語
      • 中文
      Edit links

      • This page was last edited on 18 August 2018, at 08:20 (UTC).
      • Text is available under the Creative Commons Attribution-ShareAlike License ;
        additional terms may apply. By using this site, you agree to the Terms of Use and Privacy Policy . Wikipedia® is a registered trademark of the Wikimedia Foundation, Inc. , a non-profit organization.
      • Privacy policy
      • About Wikipedia
      • Disclaimers
      • Contact Wikipedia
      • Developers
      • Cookie statement
      • Mobile view
      • Wikimedia Foundation
      • Powered by MediaWiki

      FHA Requirements
      2018 FHA Loan Limits
      Mortgage Calculators
      • FHA Loan Guidelines
      FHA Loan Limits
      MIP Information
      FHA Closing Costs

      FHA Debt Ratios
      FHA Credit Issues
      Loan Checklist

      • Credit Scores and FHA Loans
      A good FICO score is key to getting a good rate on your FHA home loan.

      FHA Requirements
      Credit Benefits
      Improving Credit

      • FHA Loan Calculators
      Be smart when it comes to your FHA loan and your financial future.

      Ability to Borrow
      Loan Affordability
      Loan Payments

      • FHA Refinance Loans
      Refinancing can be an effective way to put your home equity to work.

      Streamline Refi
      Cash-out Refi
      Simple Refi
      Rehab Loan

      • FHA One-Time Close Loans
      This program lets buyers get a single loan with just one closing.

      Construction Loan
      Buyer Benefits
      Builder Benefits
      OTC Builders

      • FHA Loan Types
      FHA Fixed Rate
      FHA ARM

      FHA Reverse
      Condo Loans

      — FHA Jumbo Loan —

      Important FHA Terms

      Important FHA Terms

      FHA Loans 101

      Download Our Guide for FHA Borrowers

      More Links of Interest

      FHA Information
      FHA Loan Facts
      FHA Questions
      FHA Appraisals
      FHA Inspectors
      FHA Foreclosures

      About Us
      Contact Us
      Customer Reviews
      Privacy Policy
      Terms of Use
      FHA Lenders

      — FHA Site Map —

      To get the mortgage process underway, you have to fill out and submit a loan application to your lender. The application form and its supporting documents are used to determine your eligibility for the home mortgage.

      FHA.com: Home Purchase and Refinance Loans

      FHA Mortgage Loan Rates

      August 19, 2018
      FHA Rates for August 19, 2018
      Offering 30 Year Fixed Mortgages

      Offering 15 Year Fixed Mortgages

      Use our mortgage calculators
      to see what you can afford!

      FHA.com is a private company, is not a government agency, and does not make loans.

      Prequalify Now!

      Compare mortgage rates for your refinance or home purchase loan.

      CHOOSE A LOAN TYPE

      then
      get
      your

      FREE CREDIT SCORE

      Do you know what’s on
      your credit report?

      FHA.com is a private company, is not a government agency, and does not make loans.

      Loan Application

      Related Terms: Loan App, Application Fee
      > See All Mortgage Terms
      When applying for a mortgage, the borrower starts the process by submitting a loan application to the lender, all the supporting documents required, and the fee for processing the application. Your loan application includes everything that will help determine whether or not you qualify for a mortgage.
      Loan Application
      The government enterprises Fannie Mae and Freddie Mac have streamlined the application form by creating the Uniform Residential Loan Application. There are different sections to it, all requiring or giving different information. After going over the type of mortgage, you have to disclose your income and expenses, assets and liabilities, etc. The same goes for any co-signer or co-borrower.

      Your lender will need a lot of supporting documents from you along with the application to better decide whether to grant you a loan. Some of the items you will need to put together are your social security numbers, address to residence, employer information, personal tax returns, W-2 forms, gross monthly salary, and more. Once all this information is collected, the lender sends the application in its entirety to an underwriter who assesses whether or not you will be granted a loan.  

      Get Today’s Rates

      Get Today’s Rates

      FREE CREDIT SCORES   From All 3 Bureaus  

      Do you know what’s on your credit report?

      Learn what your score means.

      GET STARTED

      FHA.com Reviews

      FHA.com is a one-stop resource for homebuyers who want to make the best decisions when it comes to their mortgage. With our detailed, mobile-friendly site, individuals can access information about different FHA products, the latest loan limits, and numerous other resources to make their homebuying experience easier. Take a look at some of the reviews from other FHA.com visitors!

      Mortgage Terminology

      Amortization
      Annual Income
      Appraisal
      Appraisal Fee
      APR
      ARM
      Balloon Payment
      Bankruptcy
      Borrower
      Cash-Out Refinance
      Closing Checklist
      Closing Costs
      Closing Disclosure
      Co-Borrower
      Conventional Loan
      Cosigner
      Credit History
      Credit Report
      Credit Requirements
      Debt Ratio
      Disclosure
      Discount Points
      Down Payment
      Down Payment Grant
      Earnest Money
      Eligibility
      Equity
      Escrow
      Fannie Mae
      FHA
      FHA Funding Fee
      FHA Handbook
      FHA Limits
      FHA Loan
      FHA Minimum Standards
      FHA One-Time Close
      FHA Refinance
      FHA Requirements
      FICO Score
      First-Time Homebuyer
      Fixed Rate Mortgage
      Foreclosure
      Freddie Mac
      Good Faith Estimate
      Home Equity Loan
      Home Inspection
      HUD
      HUD-1 Settlement Statement
      Identity Theft
      Interest Rate
      Joint Loan
      Jumbo Loan
      Lender
      Loan Application
      Loan Approval
      Loan Balance
      Loan Officer
      Loan Term
      Loan-to-Value Ratio
      MIP
      Monthly Payment
      Mortgage
      Mortgage Closing
      Obama Mortgage
      Origination Fee
      Owner Occupied
      PMI
      Pre-Approval
      Prepayment
      Prequalification
      Principal
      Property Tax
      Property Title
      Reverse Mortgage
      Second Mortgage
      Single Family Home
      Streamline Refinance
      Subprime Mortgage

      More Links of Interest

      FHA Information
      FHA Loan Facts
      FHA Questions
      FHA Appraisals
      FHA Inspectors
      FHA Foreclosures

      About Us
      Contact Us
      Customer Reviews
      Privacy Policy
      Terms of Use
      FHA Lenders

      — FHA Site Map —

      Quantcast