Loans
Banks offer several types of loans. Each of them is intended for its own purposes. Depending on this, the bank sets requirements for the borrower. The goals for which the money is taken can be very different: buying a new phone, car, apartment, fur coat and so on. Borrowed amounts can be large and small. Accordingly, the bank sets requirements for the borrower and his/her income. Small consumer loans can be considered on a scoring basis for 15 minutes, but if you apply for a mortgage, you will have to wait a few days or even weeks.
Types of bank loans
Consumer loan
Such loans can be divided into subspecies: cash, for the purchase of equipment, furniture, clothing, etc. This is the easiest type of loan when the bank’s requirements for borrowers are very minimal. Approximate requirements look like this: work experience at least 3 months, at least 18 years of age, permanent residence, income is not lower than the minimum wage in the county.
This is due to the fact that the requested amounts are small and come with an initial payment (for example, a loan to buy a phone can be taken with a down payment of 10-20%, and the remaining amount can be extended for several months). The terms are also small – from 3 months to 2 years. It is enough to provide only an ID document and a second document upon request (SSN, driver’s license).
A cash loan is general-purpose. Due to the fact that consumer loans are issued quickly and the amounts are small, there are increased risks of default. For this reason, interest rates are quite high and reach 70% per annum.
Car loans
This is the target type of loan issued for the purchase of a car. This type of loan can be obtained at a bank branch or at any car dealership through a bank representative. A car loan is issued to buy a new car (in order to buy a used car you will have to take a general-purpose loan). The main features of a car loan: on-site registration, a minimum set of documents, purpose, the possibility of making a down payment, low rates. The average interest rate on car loans reaches 15-19%. The largest costs will be insurance: personal insurance, car insurance and so on. Often a car loan is issued on two documents. The technical inspection card is kept at the bank as collateral until the client repays the loan. A car is a liquid asset that can be easily sold. If a client cannot repay the debt, the bank can quickly realize the collateral and cover the debt.
Mortgage
The mortgage also applies to targeted loans that are issued for the purchase of real estate: apartments, houses, land, etc. This is the longest-term loan – the repayment period can stretch to 50 years. This is due to the fact that the bak issues large amounts in this case (several thousand dollars).
Many investors cannot afford to repay a debt in a short time, so they pay little by little in small payments. The process of considering an application for a mortgage is rather complicated because the bank needs to evaluate the solvency of the borrower for several decades. Due to the difficult economic situation, constant crises, reductions, declining incomes, it’s almost impossible to say exactly what the current financial situation will be like tomorrow.
To apply for a mortgage, you require the most voluminous package of documents. The mandatory documents include an ID, a second document (driver’s license, SSN, technical inspection card, etc). The terms of consideration can also drag on to 1-2 weeks.
The bank will carefully check the credit history, evaluate all possible risks. If approved, the client must make a down payment. The larger the fee, the better. It will mean that the client is serious about paying the debt. For the period of payment of the mortgage, the property acts as collateral for the bank, and if the borrower cannot pay, the property will be sold. Such an outcome of events is disadvantageous for the client since he or she will remain at a loss – the bank will sell the collateral at a reduced price.
Thus, the process of obtaining a mortgage is long and costly. Rates will also vary depending on the type of property, the term, the size of the down payment, and other parameters.
Business loans
An indispensable factor in the development of business in the country is favorable conditions and opportunities for its lending. There are a large number of different loans, the funds of which can be used to open or develop a business.
Types of business loans
Today, banks issue several different business loans:
- Overdraft. It is available to both individuals and legal entities. It is a credit line with a certain limit, the size of which depends on the turnover on the account. With a frequency of once every two weeks or a month, the borrower is obliged to fully repay the overdraft, after which he can use the funds within the allocated limit again;
- Commercial mortgage. The basic principle of interaction between the borrower and the bank resembles a conventional mortgage, however, in this case, we are not talking about buying a home, but about acquiring office, warehouse, industrial premises or another commercial real estate;
- Commodity loan. The borrower receives the goods he needs from the bank, gradually paying for it, taking into account the accrued interest.
In addition to those listed in practice, many other types of commercial loans are also available, which is not surprising, given the demand for this type of banking services.
Leasing
Leasing is a separate type of lending, which is often called a financial lease. Its mechanism is as follows – the borrower receives from the lessor the equipment he needs, a vehicle, or even real estate, operating and gradually paying for it. Prior to the final payment, the leasing object is owned by the lender, and after payment of the full amount of the financial lease agreement, it is transferred to the borrower. An important advantage of this method of lending are tax benefits provided by law.
Credit card
This is a renewable type of loan at the bank, and you can use it endlessly, observing the repayment conditions. A credit card is issued on one ID document. You can use it to pay and return money in the grace period without paying additional interest.
It will be beneficial when using small amounts and a short return period. Credit limits are low here, but if you do not fit into the grace period, the overpayment will be large. When choosing a credit card, you should be guided by the grace period work scheme, conditions for returning the used limit, additional bonuses (cache back) and other parameters.
Which loan to choose?
It all depends on the specific situation. If you need a large amount, then it is worth considering a consumer loan. If you are planning a purchase of the real estate, then you should choose a mortgage because it this case, you can take it for a long time. If you need a small amount, you can use a credit card or a consumer loan. If money is required constantly (in small amounts), then a credit card is an ideal option – it will always allow you to have the right amount on hand and not collect a whole package of documents to apply for a new loan.