Understanding Loans and Their Types

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What is a loan?

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A loan is a sum of money borrowed from a lender that is expected to be paid back with interest.

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What is compound interest?

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Compound interest is interest calculated on the initial principal and also on the accumulated interest from previous periods.

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What is a mortgage?

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A mortgage is a type of loan specifically used to purchase real estate, where the property serves as collateral.

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What factors can affect a loan's interest rate?

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Factors include credit score, loan amount, loan term, and market conditions.

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What is a cash loan?

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A cash loan is a type of loan that is received by the borrower in cash.

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How is simple interest calculated?

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Simple interest is calculated using the formula: Interest = Principal x Rate x Time.

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What is the formula for calculating compound interest?

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Compound Interest = Principal x (1 + Rate/Number of Compounding Periods)^(Number of Compounding Periods x Time) - Principal.

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What is a credit score?

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A credit score is a numerical representation of a borrower's creditworthiness, based on their credit history.

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What is predatory lending?

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Predatory lending refers to unfair, deceptive, or fraudulent practices by lenders during the loan process.

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What is the difference between secured and unsecured loans?

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Secured loans are backed by collateral, while unsecured loans are not and are based solely on the borrower's creditworthiness.