Modern borrowing opportunities are diverse, so much so that it is easy to get confused by the wide range of offers. In addition, complex loan terms exacerbated the embarrassment, sometimes even explaining the type of loan and its unlimited possibilities.
At the same time, getting a cash loan is a responsible and serious step in your life, so it is essential to understand and understand the nature of the loan. It is equally important to realize your abilities so that your choice will not cause harm and unnecessary anxiety. On the contrary, it will become a successful financial transaction.
The article discusses the types of loans: consumption, or cash, credit; car loans; car leases; re-crediting; maintenance loans; mortgage loans; fast loans.
Before starting to study all types of loans, we recommend that you familiarize yourself with some basic principles, which will help you understand the nature of loans. If you already understand the basic principles of loans and the important criteria that must be considered when choosing a loan, please click on the “Personal Loan” link to enter the section that considers the first type of loan in more detail.
Loan: Concept, Signs, Order of Issue
A loan is a process of lending money or property to a party within a specified period of time. Participants in the legal relationship determine the procedures as well conditions for debt transfer in the form of an agreement, including the useful life of the property and accrued interest. In addition, loans can be provided for free.
The main type of loan are:
- property – providing for the free transfer of the object;
- consumer (consumer credit);
Interest-free loans are usually issued by company management to employees, and the state grants certain categories of citizens. Taking into account the main purpose of financial institutions to make profits, bank loans always provide accrued interest.
As the advantage of a loan, it should be noted that there is no overpayment, nor is it linked to the credit history of the borrower.
The essential characteristics of loans that distinguish this type of small from standard loans include:
- Transfer the temporarily used property to another person within a specified period, after which the debt will be returned to the owner, in addition it cannot be replaced with similar items or compensation;
- There is no obligation to pay interest for the use of property or rent.
Credit: Definition and Types
Credit-Transfer funds from the lender to the borrower according to the conditions of emergency, payment, and repayment. In most cases, the lender is a banking organization.
According to the loan agreement, any individual or company can become a borrower. The financing terms stipulate that the debt amount, as well as accrued interest, shall be returned strictly on time.
If the borrower refuses to perform its obligations, the lender has the right to initiate a compulsory collection procedure.
According to different loan methods, loans are divided into the following types:
- Consumers-used to purchase goods and services;
- The banking industry-provide targeted capital expenditures, including leasing as well as factoring;
- Mortgage loans, funds used to purchase residential real estate;
- Commercial-a form of interaction between counterparties involving the provision of instalments or deferred payments;
- Pawnshops-provide funds secured by liquid securities;
- State-Use low-interest rates to fund individuals and legal entities from the state budget.
Credit history- what is it and how does it affect obtaining a loan?
Credit history is an overview of your financial obligations, including long-term fulfilled and unfulfilled commitments. In addition, it is essential to know that the credit history also considers the accuracy of the payment, including timely payment of utility bills or other services.
Credit history is essential because it determines the formation of your further financial obligations; in other words, it directly affects your chances of obtaining the required loan.
After receiving the loan application, the lender will check the borrower’s credit history against the credit register and contact the borrower if necessary to request other information that may help the lender to evaluate, such as the source of income. It should be added that in the absence of work or official income, loans may be rejected.
Suppose the credit history is negative, or the borrower is found to have outstanding debts. In that case, frequent delays in payments, a disproportionately large number of outstanding loan obligations, etc., will reduce the probability of obtaining a loan.
According to the internal situation of the credit institution, the loan applied by the borrower may have a higher interest rate for monthly repayment or down payment. Still, credit institutions may also refuse to provide loans due to damaged credit records.
How to apply for a loan?
If you could only apply for a loan by visiting a non-bank lending institution or a bank branch, there are now more opportunities to do so, and it is much more convenient.
Of course, you can apply for a loan in a known way-go to the lender’s office to fill out the application form in person, but this can also be done remotely, such as by phone or calling the lender’s customer service centre.
The customer service specialist will ask the borrower’s questions during the dialogue instead of filling out the application form. Still, it should be noted that the borrower must have the right to access data, such as a passport or electronic ID.
According to maturity for the type of loan, loans are divided into short-term (up to 1 year), medium-term (1-3 years), and long-term (over three years). Interest rates can be fixed or floating. In the first option, the interest on the loan remains unchanged for the entire term of the loan agreement. Researching information and quotations are very important, so you must carefully read all its terms before signing a contract. If you have any questions, we recommend that you contact an expert, as well as they will be happy to tell you everything in a language that the borrower can understand.