A loan is a sum of money that one party lends to another, typically with the expectation that it will be paid back with interest over a specified period. Loans can be used for various purposes, such as buying a home, financing education, or starting a business. The terms of a loan, including the interest rate and repayment schedule, are usually outlined in a legal agreement. There are different types of loans, including personal loans, mortgages, and student loans. Lenders, such as banks or credit unions, assess the borrower's creditworthiness before approving a loan. This assessment helps determine the interest rate and the amount that can be borrowed.