What does a loan typically consist of?

A loan typically consists of the sum of borrowed money and interest. When you take out a loan, you receive a certain amount of money, referred to as the principal. Over the life of the loan, the borrower is usually required to pay back the principal along with interest, which is the cost of borrowing that money.

Interest is typically calculated as a percentage of the principal amount and is added to the total amount owed over time. Therefore, when considering what a loan includes, it encompasses both the initial borrowed amount and the interest accrued during the loan term, making the answer highlighting the sum of the borrowed money and interest the accurate choice.

In contrast, focusing solely on interest payments or just the principal with additional fees would omit essential aspects of a loan's structure. The market value of the property, while important in real estate transactions, does not directly define what comprises the loan itself and is therefore not relevant to the fundamental components of a loan.