A trader is said to have a forex trading loan if he or she gets some securities from another party to pay back in a later date. The payment is meant to be the exact amount of commodity borrowed, and some interest as agreed with both parties at the onset of the deal.
This is not so much different from what is seen in the case of bank loans (for example); where one can borrow money based on some terms and conditions, and pays back after an agreed period of time together with an agreed interest. Forex loan may be for a pre-defined one time amount or can be accessible as an open ended line of credit up to a particular boundary.
The terms surrounding a forex trading loan is based on the agreement of each party involved (the lender and the borrower) in the forex transaction before any money, currency or commodity changes hand. If the lender needs a collateral to be deposited, then it is stated in the loan agreement leaflets. Forex trading loans are made up of maximum amount of interest required and the length of time specified for the repayment of the amount of money loaned.
Forex trading loans can come from forex traders, investors/individuals, corporations, financial bodies, forex banks and the government. These loan parties provides a medium to increase the overall money supply in an economy, expand forex business operations and opens up financial competitions. The interest and fees generated from forex trading loans are seen as primary sources of revenue and income for the above listed loan participants.