Loans are banking products with quite a large variety. Some are only available to natural persons, others can only be used by entrepreneurs. They are granted on different conditions, they require a different kind of security. Let’s see what are the most popular types of bank loans available on the market.
The concept of credit
A loan is a form of economic relationship that is established between a lender and a borrower on the basis of a contract. The lender provides the funds which the borrower allocates for a specific purpose and undertakes to return them within a specified period. The fee for making the funds available is commission and interest. Therefore, the basic features of a loan that define it are: maneuverability, purposefulness and payment.
Types of bank loans
The general, narrowest breakdown of bank loans refers to the borrower’s side, which can be: a natural person or business entity. Within this division, further distinctions can be made depending on the specific characteristics of the product, such as:
- the method of securing the loan – e.g. mortgage,
- loan duration – long- or short-term commitment,
- the purpose for which it can be intended – e.g. car loan,
- form – e.g. credit card, revolving loan,
- currency in which it is granted,
- interest rate rules.
Apart from these formal divisions, in the financial market we are dealing with several of the most popular products that we will describe.
As the name suggests, this type of credit is intended for consumers, i.e. natural persons. Another common name for this banking product is credit for the population. The rules for granting it are regulated by the Consumer Credit Act of May 12, 2011. The basis for its conclusion is a loan agreement in five different versions, which are specified in detail in the said Act. Its value may not exceed $ 255,550. Examples of consumer loans include: cash loan, non-bank loan, credit card, home loan.
It’s a type of long-term loan. The conditions for granting it are to establish a security for the bank, which is a real estate mortgage. The purpose for which the mortgage is granted is usually to buy a property or a construction investment.
A consolidation loan
This type of loan facilitates the repayment of several existing liabilities. It consists in their consolidation, i.e. joining them into one liability, thanks to which you can obtain more favorable terms of debt repayment – most often it is a reduction in the monthly loan installment.
The investment loan belongs to the group of business loans, therefore it can be granted only to entities conducting business activity. This is an earmarked loan, intended for investments of the enterprise which are to increase its assets.