Legal Definitions - character loan

Definition: A loan made based on the borrower's character and stable earnings. It can be secured by a mortgage or other property, but sometimes it is unsecured.

Example: John wants to start a small business but doesn't have enough collateral to secure a loan. However, he has a good reputation in the community and a stable job. The bank decides to give him a character loan based on his reputation and earnings.

Explanation: In this example, the bank is willing to give John a loan even though he doesn't have enough collateral to secure it. This is because they trust his character and believe he will be able to repay the loan based on his stable earnings. A character loan is often given to individuals who have a good reputation in the community and a stable source of income, but may not have enough collateral to secure a traditional loan.