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between the lender and the borrower Philippine housing loan
The borrower initially receives an amount of money from the lender, which
they pay back, usually but not always in regular installments, to the
lender. This service is
Philippines mortgage home loan
generally provided at a cost, referred to as interest on the debt. A
borrower may be subject to certain restrictions known as loan covenants
under the terms of the loan.
Philippines home loan
Acting as a provider of loans is one of the principal tasks for financial
institutions. For other institutions, issuing of debt contracts such as
bonds is a typical source of funding. Bank loans and credit are one way to
increase the money supply.
Legally, a loan is a contractual promise of a debtor to repay a sum of
money in exchange for the promise of a creditor to give another sum of
money.
Contents [hide]
1 Types of loans
1.1 Secured
1.2 Unsecured
2 Abuses in lending
3 United States taxes
4 Income from discharge of indebtedness
5 See also
6 References
[edit] Types of loans Philippine loans
[edit] Secured
A secured loan is a loan in which the borrower pledges some asset (e.g. a
car or property) as collateral for the loan.
A mortgage loan is a very common type of debt instrument, home loans
Philippines used by many individuals to purchase housing. In this
arrangement, the money is used to purchase the property. The financial
institution, however, is given security - a lien on the title to the house
- until the mortgage is paid off in full. If the borrower defaults on the
loan, the bank would have the legal right to repossess the house and sell
it, to recover sums owing to it.
In some instances, a loan taken out to purchase a new or used car may be
secured by the car, in much the same way as a mortgage is secured by
housing. The duration of the loan period is considerably shorter - often
corresponding to the useful life of the car. There are two types of auto
loans, direct and indirect. A direct auto loan is where a bank gives the
loan directly to a consumer. An indirect auto loan is where a car
dealership acts as an intermediary between the bank or financial
institution and the consumer.
A type of loan housing loan in the Philippines
especially used in limited partnership agreements is the recourse
note.
A stock hedge loan is a special type of securities lending whereby the
stock of a borrower is hedged by the lender against loss, using options or
other hedging strategies to reduce lender risk.[citation needed]
[edit] Unsecured
Unsecured loans are monetary loans that are not secured against the
borrowers assets. These may be available from financial institutions under
many different guises or marketing packages:
credit card debt,
personal loans,
bank overdrafts
credit facilities or lines of credit
corporate bonds
The interest rates applicable to these different forms may vary depending
on the lender, the borrower. These may or may not be regulated by law. In
the United Kingdom, when applied to individuals, these may come under the
Consumer Credit Act 1974.
[edit] Abuses in lending
Predatory lending is one form of abuse in the granting of loans. It
usually involves granting a loan in order to put the borrower in a
position that one can gain advantage over him or her. Where the
moneylender is not authorised, it could be considered a loan shark.
Usury is a different form of abuse, where the lender charges excessive
interest. In different time periods and cultures the acceptable interest
rate has varied, from no interest at all to unlimited interest rates.
Credit card companies in some countries have been accused by consumer
organisations of lending at usurious interest rates and making money out
of frivolous "extra charges" [1]
Abuses can also take place in the form of the customer abusing the lender
by not repaying the loan or with an intent to defraud the lender.
foreigner right to have a bank loan in philippines
[edit] United States taxes
Most of the basic rules governing how loans are handled for tax purposes
in the United States are uncodified by both Congress (the Internal Revenue
Code) and the Treasury Department (Treasury Regulations – another set of
rules that interpret the Internal Revenue Code).[2] Yet such rules are
universally accepted.[3]
1. A loan is not gross income to the borrower.[4] Since the borrower has
the obligation to repay the loan, the borrower has no accession to
wealth.[5]
2. The lender may not deduct the amount of the loan.[6] The rationale here
is that one asset (the cash) has been converted into a different asset (a
promise of repayment).[7] Deductions are not typically available when an
outlay serves to create a new or different asset.[8]
Pagibig housing loan Philippines
3. The amount paid to satisfy the loan obligation is not deductible by the
borrower.[9]
4. Repayment of the loan is not gross income to the lender.[10] In effect,
the promise of repayment is converted back to cash, with no accession to
wealth by the lender.[11]
5. Interest paid to the lender is included in the lender’s gross
income.[12] Interest paid represents compensation for the use of the
lender’s money or property and thus represents profit or an accession to
wealth to the lender.[13] Interest income can be attributed to lenders
even if the lender doesn’t charge a minimum amount of interest.[14]
6. Interest paid to the lender may be deductible by the borrower.[15] In
general, interest paid in connection with the borrower’s business activity
is deductible, while interest paid on personal loans are not
deductible.[16] The major exception here is interest paid on a home
mortgage.[17]
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