Now let's have a closer look at loans and give an overview of the many different types of loans there are. Because while all loans are documented agreements between a lender and a borrower, there are many different categories to be aware of. The first way to distinguish between loans is by the type of borrower. While loans to governments do exist, the most common receiver of loans is the private sector. That's why practitioners primarily distinguish between household and corporate debt. In this context, household debt is money borrowed by individuals, and typically includes consumer loans and residential mortgages. Consumer loans are those personal loans such as for buying a new car, upgrading your home technology, or consolidating your debt. They're usually standardized. Think of them as off the shelf products. The same rules apply to everyone. Then there's the big one, residential mortgages.

These are the loans that help you buy a house. They come with a set of standardized terms and conditions. It's like a blueprint that fits the typical homeowner's needs. But of course, some adjustments are possible to reflect the individual circumstances. Now, let's look at corporate debt. In general, this refers to money borrowed by businesses. While there are many different types of corporate loans available, they'll all be either bilateral loans or syndicated loans. A bilateral loan is between a single borrower and a single lender, often used by businesses for specific needs like buying a new equipment or expanding operations. It's a one-on-one financial conversation with tailored terms syndicated loans, however, where multiple lenders pool together to loan out large sums to corporations. Imagine a business that wants to build a new headquarters or acquire another company. It's a big endeavor, so they bring in a group of banks to share the risk and provide the necessary funds. It's like crowdfunding a project, but in the world of big finance. Unlike household loans, the term corporate loans can be more nuanced, negotiated based on the company's health, the project type, the risk involved. This is because businesses are as varied as the stars in the sky, each with unique needs, risks, and strategies. So their debt structures need to be just as adaptable, allowing for creative finance solutions that standard consumer loans just don't provide. In essence, household debt is like a ready-to-wear, garment fitting most, but tailored to none. Corporate debt, however, is more like a bespoke suit crafted to fit the precise measurements of the business at hand.