Loans     A loan is a simple concept: Someone gives you money in exchange for your promise to pay it back. The lender could be a bank, friend, family member or anyone else willing to lend you money. The lender will almost always charge interest, which compensates the lender for the risk that you wont pay back the loan. Usually, the lender has you sign some papers (called a note and loan agreement) spelling out the details of your loan agreement. (See, for examples.)     While these basic concepts are simple, not everyone seems to clearly understand them. For example, some people put a great deal of energy into arranging to borrow money, but think little about the hard work that goes into repaying it. The important thing to understand is that the lender expects you to pay the money back. Its only fair that you honor your promise if you possibly can.     Your business may be so successful that you can pay back the loan sooner than the original note calls for and save some interest expense in the process. Some state laws allow repayment of the entire principal at any time with no penalty. However, laws in some states allow the lender to charge a penalty of lost interest if the borrower pays the loan back sooner than called for. Make sure you read the loan documents and ask about prepayment penalties. Your lender may be willing to cross a prepayment penalty clause out of the agreement if you ask.     As for the manner in which loans are repaid, there are about as many variations as there are loans. Here are the most typical:     Fully amortized loan. This type of loan repayment provides for principal and interest to be paid off in equal monthly payments for a certain number of months. When youve made all the payments, you dont owe anything else. The interest rate and the number of years or months you agree to make payments can change your monthly payments a great deal; pay close attention to these details. For example, if you borrow $10,000 for five years at 10% interest, you will agree to make sixty monthly payments of $212.48, for a total repayment of $12,748.80. That means you will pay $2,748.80 in interest. Now lets say you borrow $10,000 for five years at 20% interest. Your monthly payments will be $264.92 and you will end up paying $15,895, including $5,895 in interest.     Balloon payment loan. This loan (sometimes called an interest-only loan) calls for repayment of relatively small amounts for a pre-established period of time. You then pay the entire remaining amount off at once. This last large payment is called a "balloon payment," because its so much larger than the others. Most balloon payment loans require interest-only payments for a number of years until the entire principal amount becomes due and payable. Although this type of repayment schedule sounds unwieldy, it can be very useful if you cant make large payments now, but expect that to change in the near future.             Problems With Co-Signed Loans     Bankers sometimes request that you find a co-signer for your loan. This is likely if you have insufficient collateral or a poor or nonexistent credit history. Perhaps someone who likes your idea and has a lot of property, but little cash, will co-sign for a bank loan.