Bank loans: types and conditions

Bank loans have now become a common source of funding for large acquisitions for both the public and businesses. A non-interested person can often find it difficult to deal with different loan offers and loan conditions.

Bank loan – transfer of funds from a credit institution to a natural or legal person, subject to their repayment after a certain period.

Types of bank loans

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There is no single division of loans into certain types of economies. The most common classification features are most often distinguished:

  • lending entity (natural persons, legal entities);
  • term (short, medium, long, on request);
  • purpose (consumer, car loans, investments, mortgages, trade, industry, agriculture);
  • availability of reinsurance (secured, unsecured);
  • size (small, medium, large);
  • repayment method (payable as a lump sum, payable on schedule);
  • type of interest rates (fixed rate, floating rate).

Bank credit and the Russian banking system are currently changing: the number of loan offers is increasing, and their conditions are becoming more diverse.

Furthermore, the article discusses in detail the most common bank cash loans for individuals and the important parameters of credit programs.

Consumer loans

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A consumer is a bank lending to an urgent need, a means for which you may spend at your discretion for any purpose. A consumer loan can be the best option if the amount is not large, and the speed and ease of receiving money is very important.

If necessary, you can get a credit card, bank account or cash. Payment is possible via cash registers, ATMs and via the Internet. You can pay by credit card, cash or bank transfer.

Conditions:

  • Loan amount: the minimum amount is between 15 – 50 thousand. USD, maximum – from 500 this. up to 3 million. The amount can be increased for clients with perfect credit history and payroll clients.
  • Interest rate: depends on several parameters and has a widespread in different banks.
  • Loan Term: Normally issued for up to 5 years, but may increase for some categories of borrowers or with expensive collateral. For example, a consumer bank loan is provided by Sberbank for up to 20 years with collateral.
  • Reinsurance: reinsurance, the liability of natural or legal persons, release without reinsurance is possible.
  • Duration: 30 minutes to several days.

Advantages:

  • A small package of documents.
  • Simplified procedure for examining loan applications.
  • Short-term extradition decision.
  • There is no control over the purpose of spending money.
  • Ability to receive money at hand.

Disadvantages:

  • High credit rates.
  • Low maximum loan amount.
  • A short-term loan and consequently a large monthly payment.
  • The borrower’s maximum age is lower than for other loans.

Credit Cards

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Conditions:

  • Loan size: the maximum amounts on credit cards are usually low and amount to 100-700 thousand USD.
  • Interest rate: the highest rates on all loans range from 17.9% to 79% per year.
  • Loan period: up to 3 years
  • Reinsurance: not required.
  • Length of reflection: from a few minutes to 1 day.
  • Grace period: 50–56 days during which interest is not repaid on time.
  • Other charges: Often, commissions are issued for the payment and escort of the card. For example, a “useful card” for a home credit card costs 990 USD a year, and a useful purchase card is free.

Advantages:

  • The presence of grace.
  • Simple application approval process.
  • Minimum time to consider.
  • A minimal set of documents.
  • There is no control over spending money.
  • Possibility of receiving by courier or by post.

Disadvantages:

  • High-interest rates.
  • High late fees.
  • ATM withdrawal fees.
  • Low loan amount.
  • Annual maintenance fee.

Car loans

Cars became an urgent need, but not always enough money to make such a purchase. Bank loans for the purchase of vehicles are called car loans.

Conditions:

  • Loan amount: maximum amount of 1-5 million USD.
  • Interest rate: from 10% per year for new cars and from 20% per year for used cars.
  • Credit period: up to 5 years, for large amounts the term can be extended.
  • Provision: purchased motor vehicle.
  • Duration: 30 minutes to several days.
  • Deposit: usually 10-25%, but some banks offer programs without a deposit.

Advantages:

  • Low-interest rates.
  • The amount is higher than the consumer loan.
  • Short deadlines for examining the application.

Disadvantages:

  • The package is larger than consumer loans.
  • Short lending period and consequently a large monthly payment.
  • Need for initial savings.
  • Control of spending.

Mortgage loans

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The real estate market is actively developing, with a tendency to buy apartments and build houses. Most of the purchases of apartments are at banks. For this purpose, a mortgage loan – a loan for the purchase of property – is intended.

Conditions:

  • The size of the loan: the amount of the mortgage varies from 100 to 300 thousand to 500 thousand to 15 million USD.
  • Interest rate: depending on the loan program, from 10.5% to 25% per year. Mortgage rates are the lowest for all types of loans.
  • Loan term: in various banks ranges from 15 to 30 years.
  • Collateral: a pledge of acquired or existing housing.
  • Deposit: from 10 to 25% of the cost of housing.
  • Length of reflection: from week to month.

Advantages:

  • Possibility of processing large quantities.
  • Long loan period.
  • Low-interest rates
  • The ability to attract co-debtors.

Disadvantages:

  • Volume package of documents.
  • Long-term review of the application.
  • The need for real estate collateral.
  • Control over targeted spending.

Loan parameters

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Before you decide on a particular type of loan and credit program, you need to evaluate how profitable it is and analyze its main parameters:

  • Interest rate.
  • Method of repayment.
  • Type of payment schedule.
  • The basis for calculating interest.
  • Additional charges.
  • Related costs.

Interest rate

Interest rate

The interest rate spread is apparent for various lending programs, even at the same bank. Interest in bank loans depends on many factors, the most important of which are:

  • Customer reliability. Credit institutions shall give priority to clients receiving a pension or salary from their account as well as to borrowers with a positive credit history. They always offer preferential interest rates for these categories of applicants.
  • Deadline and amount. It is advantageous for the bank to issue large amounts, so the rate decreases as the amount increases. Conversely, the longer the term, the higher the rate. In longer periods, bets are sometimes up to five percentage points higher.
  • Speed ​​of clearance. Express loans with a minimum list of documents pose a big risk to the bank, so such loans are sometimes twice as expensive.
  • Purpose. For targeted loans (such as mortgages or car loans), the rate is always lower. Consumer loans also have targeted programs with preferential interest rates (eg for the development of personal branch land).
  • Availability of insurance. Life insurance or loss of employment may reduce the rate by several points.