a loan is a transaction whereby a lender makes available a certain amount of money by a contract. We acquire a loan obligation to repay the money within a period of time and paying some fees and interest agreed. You can return the money in one or more payments, but usually the amount is repaid in monthly installments including commissions and interest.
Speaking of the loan, the amount of money we borrow is called the ‘principal’, while ‘interest’ is the price we pay for being able to have that money. The time period to repay the loan is known as the ‘term’.
The ‘lender’ is the person or financial institution lending the money or property on loan. The ‘borrower’ is the person who receives money or property on loan.
According to Article 1740 Civil Code, “by the loan agreement, one party delivers to the other, or something not fungible to use it for some time and is being returned, in which case it is called loan, or money or other fungible thing, on condition of return another of the same kind and quality, in which case just keeps the name of the loan. The bailment is essentially free. The loan can be simple free or covenant to pay interest. “
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