Loans are sums of money that you borrow from a lender, such as a bank or credit union, and agree to pay back in a specified time frame along with interest. They are often used to fund large purchases, such as a car or home. A loan can also be used to cover short-term cash flow needs. However, there are many different types of loans and their features can vary significantly. Understanding how these loans work can help you choose the right one for your financial situation.