Loans - GCSE Business Definition

Loans are sums of money borrowed from a financial institution that must be repaid over an agreed period of time, with interest. In GCSE Business, loans are often used by individuals or businesses to finance large purchases or investments when they do not have enough funds available immediately. The borrower agrees to repay the loan to the lender in installments. This includes the original borrowed amount (principal) plus a cost for borrowing the money (interest). Understanding how loans work is important, as it helps students manage finances and appreciate the implications of borrowing.