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Disintermediation occurred when people moved money from savings and loans into investments paying a higher rate of interest. The term loan refers to a sort of credit vehicle in which a sum of money is provided to another party in consideration for future repayment of the value or principal amount.
In many circumstances, the lender also adds interest or finance charges to the principle value, which the borrower must repay in addition to the principal sum. Loans interest might be for a fixed amount or an open-ended line of credit up to a certain maximum. Loans come in a variety of types, including secured, unsecured, commercial, and personal loans.
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It is referred to as disintermediation when customers move their money from savings and loans into assets paying a greater rate of interest.
The idea was developed in the financial sector to enable investors to purchase financial products without the use of an intermediary like a broker or bank. After the government limited bank interest rates for federally insured accounts, people started withdrawing their funds from savings accounts to invest directly in bonds or stocks in order to find higher returns.
The most attention has undoubtedly been paid to decentralized ecosystems that support disintermediation through platforms and protocols that utilize distributed ledger technology.
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