To help you understand loans and the process in general, let's look at the history of the most common type of loan - the mortgage.
In the 17th century in France, the birth of the mortgage loans, a mortgage meant a conveyance on a piece of land. This loan was absolute on its face and seemed a fee simple estate. In reality, however, it was condition and would not be enforceable or existing were not the necessary conditions met.
These conditions were generally the repayment of the loans or loan to the originating landowner - the debtor. Mortgage loans differed from what were then referred to as live gage, in that the mortgage was not dependent of repayment by way of the sale of livestock or crops, or the delivery of the fruits of the land - the crops and livestock - to the original landowner. The mortgage loans, then, were still in effect even if the land was not successful in producing crops or livestock that sufficiently brought the income required to repay the debt. These new mortgage loans were, in contrast to those who came before them, were due no matter the financial situation and ability to pay of the debtor.
What is commonplace today - the repayment of loans with local currency - was a devastating and startling change in centuries past. The lender then was the property owner and was free to sell it or refuse to sign it over to the borrower. As time went by however, equity courts started to step in to protect the interest of the borrowers of these loans, and to insist that they have the right to property they paid for. This right from that time was named the equity of redemption.
This legal arrangement, which made the lender the owner while she or he had few practical ownership rights was determined by several court systems to be awkward and constrainingly artificial. Another statute was passed that said that when the mortgage loans were made the borrower would retain ownership of the mortgaged property, but the lender would have the right of foreclosure, the power to take possession of it and to sell it if the loans were not paid as instructed.
Now, in the U.S. every state that handles mortgage loans this way is referred to as a lien state. This law was first passed in Wales and England by legislation entitled Property Act of 1925. This abolished mortgage loans by fee simple.
Before you set out on any quest for loans, mortgage or otherwise, there are some terms with which you should be familiar.
The first term is called advance. Unlike the employment advance where money is given to you prior to your having earned it, a loan advance refers to the total money that you borrow plus the fees for doing so.
The term base rate, which you'll hear often when referring to loans, means similar things in both the U.S. and the UK. UK base rate is the rate of interest set by the Bank of England, while in the United States, it is the discount rate that is dictated by the Federal Reserve. |
