What is a bank loan

Bank loans are amounts of money provided to borrowers, which are issued on the terms specified in loan agreements. Lending is carried out for a specified period and is one of the ways to meet financial needs. Thus, loans play an important role in the life of society and help to develop the economy of the state.

There are numerous styles of financial institution loans.In the case of active loans, the bank acts as a lender. If lending is passive, then the financial institution itself is already considered the borrower of funds. Further in the article, we will talk about the first type of loans, since the interbank movement of money belongs to highly specialized areas of the economy.

Types of bank loan

 Among the main types of bank loans, the following can be distinguished - consumer loans, credit cards, car loans, mortgages and investment loans. Consider the features of each type of lending.

Consumer loans

A bank loan is issued for ordering services or purchasing consumer goods. This is where the name comes from. Loans are taken to order furniture, telephones, vacuum cleaners, refrigerators, computers, lamps, etc.

Banks issue loans for almost all the goods that you see in stores every day. It is quite possible to even buy food for credit money. It is especially beneficial to do this shortly before the salary, when there is usually a hole in the family budget.

A consumer loan can be issued by both an entrepreneur and a private person. If the amount is not too large, you will not have to collect a large package of documents. The issuance of money on average takes 1-5 days.

Credit cards

"Credit cards" make it possible to use borrowed money within the established limit. Suppose you went to the store, and there are not enough funds from the account to make a payment. The bank covers the shortfall.

If you return the money while the grace period lasts, you will not need to pay interest. You do not have to account for the funds within the credit line. You spend them how you want. The main thing is to repay the principal amount of the debt on time.

Card settlements have a greater degree of automation than loan transactions. As a result, the cost of their maintenance is reduced. As a result, commissions for credit card holders are reduced.

Finally, card payments are convenient. A small piece of plastic can replace hundreds of thousands and millions of rubles. With the development of mobile applications, you can not take cards with you, but pay through smartphones.

Auto loans

Auto loans. After the conclusion of the loan transaction, the purchased car becomes a pledge. Loans of this type are related to consumer loans, but are allocated to a separate group due to their long terms and impressive size.

Standard car loans are taken to purchase vehicles for personal use. Commercial loans are issued for the implementation of production goals. For example, passenger transportation by bus or construction using special vehicles

 Car loans are given for new and used cars. If the car is used, the interest on the loan and the amount of the down payment increase. Preferential lending conditions for used vehicles are not provided.

 Mortgage If you strictly follow the wording, a mortgage is a form of collateral, and mortgage lending is one of the types of bank loans. However, many people consider both terms to be synonymous. Let's follow the established tradition.

 

When a mortgage is issued on a house or apartment, the purchased housing acts as a pledge. Mortgage loans are taken for 10-20 years. To get a loan, you need to collect a fairly large package of documents. Papers are required for a comprehensive check of borrowers.

The interest rate on a mortgage depends on the solvency of the client and the credit policy of the bank. Reducing payments is possible if you use any social program. Especially when the borrower is included in the privileged category of citizens.

Investment loan

Investment loans solve a wide range of problems. From business expansion or purchase of machine tools to modernization of production lines or purchase of special construction equipment. They also take loans for the repair of buildings or structures.

Investment loans are long-term and are given up to 5 years. Interest is calculated based on the business goals of the borrower, his credit history, authorized capital, etc. This type of loan is characterized by individual lending conditions.

Conclusion

Bank loans dominate the market and are often the only way to get money to grow a business, buy a home or buy consumer goods.

Knowing the possibilities and mechanisms of banks, which we described in our article, will help you not to make a mistake with the choice of a loan and avoid undesirable consequences for the family budget or company capital.

Finally, we want to wish you to always choose the most profitable loans and never experience difficulties with their timely payments!