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Simple English definitions for legal terms
participation loan
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A quick definition of participation loan:
A participation loan is a type of loan where multiple lenders come together to fund a borrower's loan. Each lender has a share in the loan and shares the risk and reward of the loan. This type of loan is often used for large projects or investments that require more funding than one lender can provide.
A more thorough explanation:
A participation loan is a type of loan where multiple lenders contribute funds to a borrower. Each lender has a percentage of ownership in the loan and shares in the risk and profits.
For example, if a borrower needs $100,000, two lenders may each contribute $50,000 to the loan. The borrower would then make payments to both lenders based on their percentage of ownership.
This type of loan is often used for large projects or investments where one lender may not be able to provide the full amount needed.