Loan is a “financial arrangement”, where in a bank grants advance to a borrower on a separate account called the loan account. Lending of funds constitute to the main business of any banking institutions. Majority of banks are employed in the form of loans and advances. Loans brings a good money to the bank in the form of profit by charging interest. The amount advanced by the banker is withdrawn by the borrower immediately in one lump sum amount.A loan is granted to the borrower on account of his credit worthiness, in order to pay before resorting to legal banks. The interest changed on the whole amount of loan sanctioned irrespective of the amount actually withdrawn by the borrower. Loan is more profitable from the banker's point of view. The interest is charged once in 3 months or six months on the amount of load outstanding during the period of 3 to 6 months. Other than the interest no other charges are levied on loan amount sanctioned. The loans sanctioned against goods, facilitates the trade in essential commodities that enable people of the county to get their necessities easily and cheaply. Loan is relatively for a larger amount. The repayment of loans can be in lump sum amount also. Once a loan is repaid in full, it cannot be withdrawn again by the borrower unless the banker sanctions a fresh loan. A loan is granted either against collateral security or against the personal security of the borrower.