Bank loan

The term "credit" comes from the Latin word creditum, which means "loan". Standardly, a loan is understood as a certain amount of money or other valuable resource (goods, thing, electronic assets), which is issued by one person to another with the obligation to repay the loan after a certain time. Participants in economic relations can be both individuals and legal entities. Loan terms are negotiated in advance.

Forms of lending

The modern world economy is growing largely due to the successful development of the credit system. The principle of operation for each species remains unchanged, but there are distinctive features that stand out from the general concept.

Main types of loans

A bank loan is a classic option, which involves the issuance of money to the borrower for a predetermined period.

A commercial loan is the issuance of goods or the provision of services by one legal entity to another in installments.

State credit implies that one of the parties is the state. It can both give and receive funds. The second actor is another state, a commercial enterprise or an individual.

The state is considered the borrower, for example, when it issues bonds. By purchasing securities, a citizen or company becomes a creditor of the country. Often, the issue helps to cope with the budget deficit. A bond has a fixed par value and a fixed interest rate. Purchased securities after some time, which is indicated in the contract, are exchanged for the amount, taking into account the original price +%.

The principle of standard lending is as follows

An individual who needs borrowed funds submits an application and the necessary package of documents to a financial institution. In most cases, the client needs to personally come to one of the offices, but in recent years online lending has been actively developing when this item is carried out through the company's website.

The organization checks the received application, analyzes the solvency of the borrower.

The bank makes a positive or negative decision.

If the request is approved, an agreement is drawn up, which indicates: the amount, repayment period, payment schedule, interest rate, penalties and other conditions.

The requested amount is given to the client.

When the debt is fully repaid, the financial institution provides a certificate of closure.

Main types of bank loans

To stimulate the interest of users in credit products, banks are constantly coming up with new "chips", varieties of loans. In recent years, installment cards or virtual credit cards have been rapidly gaining popularity. However, the key species remain unchanged.

Consumer loans

The product involves the issuance of a loan for the purchase of certain goods or services. Often, you can use the banking service right in the store where appliances, furniture, clothes, etc. are processed.

 The main requirement is adulthood. In most cases, proof of income is not required. There are options with and without a deposit. The maximum loan term rarely exceeds 5-6 years. The spread in interest rates depends on the bank, the terms of the loan, and ranges from 9 to 20%.

Credit cards

In the classification of loans, they take pride of place because they are in great demand. The money lent by the bank is stored on a plastic card, with which you can pay for purchases and, if necessary, withdraw funds.

Most credit cards have a grace period during which you can use money without interest. For example, a customer is given 50 days of preferential use. If you return the funds spent during this period of time, then% will not be charged.

An additional plus is cashback (refund of part of the funds spent). Many banks, in order to attract new customers and retain old ones, develop various affiliate programs or discount systems, and conduct promotions.

Auto loans

From the concept it becomes clear that borrowed funds are issued for the purchase of a car. The product is targeted, so you can’t use the money otherwise. A loan can be obtained at a bank office or at a car dealership with which the financial institution has a partnership agreement.

The main advantage is lower interest rates than consumer loans. This is ensured by collateral, which is the purchased car. The vehicle cannot be sold, exchanged, donated. An important condition is the need for full CASCO or OSAGO insurance.

Mortgage loans

The principle is similar to a car loan, but the purchased property acts as collateral. Unlike previous varieties, the loan term can reach several decades. Usually 20-30 years depending on the cost of housing, income of the client and other factors.

The average mortgage interest rate in Russia in 2019 ranges from 8 to 12% per year. Credit funds pay the full cost of housing or part.