What is Loans for people?

Money has been lent and exchanged in various forms and according to persons needs since a long time. Even before the advent of money as such, the barter system was widely in practice as a means for man to acquire material. Man’s craving for material has undoubtedly led to a vast system of loans and mortgages that enable customers to purchase goods with minimal stress on their own pockets.

Loans are basically lending of money by the ‘lender’ and the person receiving them is called the ‘borrower’. The principal amount loaned out to the borrower has to be repaid in regular and equally-timed installments that amount to the initial loan amount. Over and above the amount loaned out, the borrower is also obliged to pay an interest, which essentially is an incentive for the loaner to hand out the loan. Although the term loan is largely associated with monetary exchange, in certain cases even materials can be lent. Loans can be classified into two types- secured and unsecured. A secured loan is granted upon the borrower pledging some asset as a security for the loan amount. Auto loans are secured too, but their validity and the amount depend largely on the usefulness of the car being secured. Auto loans can be of two types: direct, where the bank hands the loan to the customer directly and indirect, where there is a dealer acting as an intermediary between the customer and the financial authority. With global recession and indiscriminate job-cuts being the order of the day, a lot of Canadians find it a cheaper option to finance their automobile purchases through financing.

Loans for higher education are easily attainable in Canada through the Canada Student Loans Program(CSLP). These loans issued to full-time students are interest-free. Financing is available for part-time students too through the CSLP but they must make interest payments while in study and begin payments of principal and interest when their period of study as a part-time student ceases. Students with permanent disabilities or students from low-income families are also facilitated in their study with grants. The Canadian Government also helps finance small and new businesses through grants, loans, guarantees, subsidies and tax benefits. Under the Canadian Small Business Financing Act, the government can guarantee loan to a small business to a maximum of 85 percent. The advantage being, if the borrower defaults on a loan, the bank is safeguarded. Other government organizations of note that lend in Canada include the Canada Mortgage and Housing Corporation, that helps housing plans across the country and Farm Credit Canada, which is Canada’s largest agricultural lender.

All these organizations fall under the Canada Crown Corporation, which is a state-owned enterprise and runs the general functioning of the country. Some of the important financial organizations that fall under the purview of the state-owned Crown Corporations are: Bank of Canada, Business Development Bank of Canada, Canada Mortgage and Housing Corporation, Canada Commercial Corporation, Farm Credit Canada and many more.