📌 Definition:

A loan is money borrowed from a lender that must be repaid over time with interest.

The borrowed amount is called principal.

The extra cost paid to the lender is called interest.

💳 Common types of loans:

• home loans

• personal loans

• car loans

• education loans

• business loans

• credit lines

📈 How lenders make money:

Higher interest rates increase total repayment costs.

💡 Example:

Borrow ₹5,00,000

At 12% interest

You may repay significantly more over time depending on loan duration.

🏦 What lenders evaluate:

• credit score

• income stability

• repayment history

• debt obligations

Institutions like State Bank of India and HDFC Bank evaluate borrower risk before approval.

⚠️ Risks of bad borrowing:

• debt traps

• high EMIs

• lower savings

• damaged credit score

✨ Key Takeaway:

• Borrowing can solve short-term needs
• But expensive loans can quietly reduce long-term wealth.