Loan in banks is debt securities
The most commonly used form of loan in banks is debt securities. The loan is linked to a promissory note. It is a document where the borrower declares to owe money. The debt note contains many provisions that regulate the relationship between the borrower and the lender.
Such loans can be found in financing housing, condominiums, cars and other consumption purposes.
The most common is that the debenture loan is repaid with installments. However, it can run interest-free and be redeemed in full by maturity.
Serial loan or as an annuity loan
The loan can be given either as a serial loan or as an annuity loan. Repayment times depend on customer relationships and on loan purpose. Loans e.g. to finance consumption purposes, are given as debt loan loans. The repayment time is often very short. A car loan should normally be repaid over 3-5 years.
The repayment period should be commensurate with the life of the item being financed. If the mortgage is increased to finance e.g. car, you may be left with the loan amount even after the car is “worn out”
Also, note that the total cost of a loan increases as the repayment period increases. Also, remember that the more debt associated with your home, the greater the risk that the debt ca