Loans can be classified into various categories based on the purpose for which they are taken which are given below. From a lender's point of view i.e. for a bank or financial institution giving loans will be the primary revenue generating activity apart from other non core activities. Lender will always look for a genuine and credit worthy customer to lend money from where the lender is assured for repayment. In accounting terms loans will always will be classified as assets for a lender since the lender has to recieve the repayments.

On the contrary for a borrower it will always a liability since the borrower has to repay the same over a period of time. If it is repayable in less than three year then it will be short term loan.

If it is payable in three to five years then it is called as medium term loan. For any loan which is payable over more than five years is called as long term loan.

Another concept used in loans and advances is moratorium period. It means time between the date of actual availment of loan and date of start of repayment of loans. It mahy be necessary in certail cases since the borrower may not have immidiate cash flows to start repayment.

Main points that must be kept in mind while availing a loan is what is rate of interest, what is the repayment period and whether the repayment matches with the cash flows to be generated. Various types of loans are explained in the following sections.