Bank loans: types and terms

Currently, bank loans have become a common source of finance for large purchases for both the population and businesses. It is often not easy for a layperson to understand the variety of loan offers and loan terms.

A bank loan is the transfer of funds by a financial institution to a monetary or legal person for a fee on condition that they are returned within a certain period.

Types of bank loans

Types of bank loans

In the economy, there is no single division of credit into certain types of credit. The following are the most common signs of classification:

  • the lender (natural persons, legal persons);
  • Term (short-term, medium-term, long-term, on-demand);
  • Purpose (consumer, auto loan, investment, mortgage, trade, industry, agriculture);
  • Availability of collateral (secured, unsecured);
  • Size (small, medium, large);
  • Repayment method (repayment by a single amount, repayable on time);
  • Type of interest rates (with a fixed interest rate, with a variable interest rate).

The bank loan, Russia’s banking system, is currently in a state of change: the number of loan offers is growing and their conditions are becoming more diverse.

As the article progresses, we will examine in detail the most common bank loans for individuals and the key parameters of credit programs.

Consumer credit

Consumer credit

Consumer loans are bank loans for urgent needs, the means by which you can spend at your own discretion for any purpose. Consumer loans can be the best option if the amount is not large, and the speed and ease of raising money is very important. On request, you can get a bank card, an account or cash. Payment is possible via cash registers, ATMs and on the Internet. You can pay by credit card, cash or bank transfer from your account.

Conditions:

  • Loan amount: the minimum amount varies between 15-50 thousand dollars, the maximum – from 500 thousand dollars to 3 million. For customers with a flawless credit history and payroll, the amount can be increased.
  • Interest rate: depends on different parameters and has a large spread in different banks.
  • Term of the loan: up to 5 years usually issued for a period, but can be extended for certain categories of borrowers or expensive pledged. For example, a consumer bank loan provides Good Finance for up to 20 years with real estate collateral.
  • Collateral: deposit, guarantee from natural or legal persons, issue without collateral are possible.
  • Viewing period: from 30 minutes to several days.

Benefits:

  • A small package of documents.
  • Simplified procedure for checking a loan application
  • The short deadline for deciding on delivery.
  • Control over the purpose of spending money is lacking.
  • Possibility to get money on hand.

Disadvantage:

  • High interest on the loan.
  • Low credit limit.
  • A small loan term and subsequently a large monthly payment.
  • The maximum age of the borrower is lower than for other loans.

Credit

Conditions:

  • The amount of the loan: The maximum amounts on credit cards are usually low and range from 100 to 700 thousand dollars.
  • Interest rate: The highest rates among all loans range from 17.9% to 79% per year.
  • Loan term: up to 3 years
  • Collateral: not required.
  • Exam duration: from a few minutes to a day.
  • Grace period: 50-56 days, in which no interest is counted towards the timely repayment.
  • Additional commissions: there are often commissions for redeeming and accompanying the card. For example, the “Home Credit” bank card “Every year” costs 990 dollars a year and the “Useful purchases” card is free.

Benefits:

  • Availability of a grace period
  • A simple procedure to agree on the application.
  • The minimum time for a consideration.
  • The minimum set of documents.
  • There is no control over the amount of money.
  • Possibility of receipt by the courier or by post.

Disadvantage:

  • High interest rates.
  • Large fines for late payment.
  • Commission for withdrawing funds from an ATM.
  • Low loan amount.
  • Annual card maintenance fee.

Auto loans

Auto loans

Cars became an urgent need, but not always enough money to buy them. Bank loans for the purchase of vehicles are called auto loans.

Conditions:

  • The amount of the loan: the maximum amount is 1-5 million dollars.
  • Interest rate: from 10% per year to new and from 20% per year for used cars.
  • Term of the loan: up to 5 years, for large amounts the term can be extended.
  • Security: bought the vehicle.
  • Viewing period: from 30 minutes to several days.
  • Initial payment: 10-25% more often, but some banks offer and programs without a deposit.

Benefits:

  • Low interest on the loan.
  • The amount is more than the consumer credit.
  • Short deadlines for considering the application.

Disadvantage:

  • The package of documents is more than consumer loans.
  • A short loan term and as a consequence a high monthly payment.
  • The need for initial savings.
  • Control over the funds spent.

Mortgage loan

Mortgage loan

The real estate market is actively developing, human trials, buying apartments and building houses. The majority of the apartment acquisitions are made with the participation of banks. For this purpose, a mortgage loan is designed – a loan for the purchase of real estate.

Conditions:

  • The size of the loan: the amount of the mortgage varies from 100 to 300 thousand to 500 thousand 15 million dollars.
  • Interest rate: depending on the loan program from 10.5% to 25% per year. Interest rates on mortgage programs are the lowest among all types of loans.
  • Term of the loan: in different banks varies from 15 to 30 years.
  • Security: pledging of purchased or existing apartments.
  • Initial contribution: from 10-25% of housing costs.
  • Concept of consideration: from a week to a month.

Benefits:

  • Ability to spend large sums.
  • Long Term Loans.
  • Low-interest rates
  • The ability to attract co-borrowers.

Disadvantage:

  • A large package of documents.
  • A long period of testing the application.
  • The need to transfer to mortgaging real estate.
  • Control over the targeted use of funds.