We may not always have the money we require to do certain things or to buy certain things. In such situations, individuals and businesses/firms/institutions go for the option of borrowing money from lenders.

When a lender gives money to an individual or entity with a certain guarantee or based on trust that the recipient will repay the borrowed money with certain added benefits, such as an interest rate, the process is called lending or taking a loan.

A loan has three components – principal or the borrowed amount, rate of interest and tenure or duration for which the loan is availed.

Most of us prefer borrowing money from a bank or a trusted non-banking financing company (NBFC) as they are bound to the government policies and are trustworthy. Lending is one of the primary financial products of any bank or NBFC (Non-Banking Financial Company) offers.