Personal loans and the types of consumer loans depend on the amount of money that the borrower would like to receive during a difficult financial situation. Types of personal loans are a decent selection of financial instruments and terms offered by banks and independent commercial organizations.
What is Personal Loan?
A personal loan means borrowed money that is issued by lenders for a specified period at interest to individuals. Companies themselves cannot get consumer loans. The conditions on granting personal loans are regulated by the law of the country in which the borrower lives and is its official citizen, more about different loans you could find your directly from DirectLoanTransfer.
Borrowers can spend money for any purpose not related to entrepreneurial activity. Various types of personal loans are given on the purchase of an apartment and even to spend it during a wedding. The transaction is governed by a loan agreement or loan agreement, which is drawn up in writing according to the types of personal loans. They reflect the details of receiving money, as well as the rights and obligations of the parties.
Increasingly, in everyday life, personal loans are called only those that are intended on relatively inexpensive purchases (household appliances). Otherwise, they are "loans on goods and services." The cost of such loans from banks is usually high since the money is offered directly in large stores. Some types of personal loans are used as an alternative to certain types of personal loans. You need to get them before buying. On average, it takes several days to apply. But the rate is noticeably lower than that of loans for goods and services.
Loans of the consumer type are now firmly entrenched in our lives, finally displacing the spirit of hoarding. Most of the population no longer saves up money when they want to buy the necessary thing or pay for a service. They simply go to the bank and receive the required amount in debt. This way of solving life's problems is very convenient, but, unfortunately, not usually free. You have to pay for a loan, and the size of these payments significantly affects the borrower's budget. Therefore, the question of choosing the type of personal loan should be approached very seriously, soberly assessing your own financial capabilities.
Regular Types of Personal Loans
- by target orientation;
- by the subjects of the credit transaction;
- by loan terms;
- according to the terms of provision;
- security loans;
- on charging interest;
- by the method of repayment
Terms of Targeting
In terms of targeting, the types of personal loans provided to individuals are divided into two large groups: targeted and non-targeted.
The bank issues targeted loans on a specific product or service. In this case, the money is immediately transferred in a non-cash form to the seller. Targeted loans are distinguished by favorable conditions, optimized for solving a specific task. They reduce interest rates, convenient repayment terms, the possibility of obtaining government subsidies (an educational loan with government support).
When issuing inappropriate loans, a bank or credit institution does not require reporting on the intended use of funds received by the borrower.
Subjects of the Credit Transaction
The following types of loans are distinguished by the subjects of the credit transaction:
- a) by the type of lender. These are loans provided by banks, trade organizations, pawnshops, rental offices, consumer credit unions (CPS).
- b) by the type of borrower. These are loans provided by:
- all segments of the population;
- certain social groups;
- young families;
- different age groups;
- groups of borrowers differing in income, creditworthiness, and solvency;
- VIP clients.
By Credit Terms:
- short-term (from 1 day to 1 year);
- medium-term (from 1 to 5 years);
- long-term (over 5 years).
Terms Of Provision
According to the terms of provision, the following types of consumer loans are distinguished:
A one-time loan can be provided to almost every capable citizen. The amount of the loan that the bank agrees to issue to the borrower is calculated for each individual, based on the borrower's solvency.
A revolving loan offers receiving funds in a certain period specified in the loan agreement, during which the borrower can count on the full provision of the loan amount.
The following types of personal loans are distinguished by collateral:
- secured (by a pledge, guarantees, sureties);
- unsecured (blank).
- with deduction of the interest rate at the time of provision;
- with interest payments during loan repayment;
- with the payment of the interest rate in equal installments upon maturity;
- periodic (annuity) payments on a loan with simultaneous payment of interest.
Sometimes you can see advertisements for interest-free targeted loans or non-targeted loans with a very low-interest rate. You should know that any organization that issues loans receives its profit from the interest on the loan. Types of personal loans with a zero interest rate are usually covered either by large commissions to the bank or by artificially inflated prices for goods.
- one-time repayment (current accounts opened by the buyer for a period of 1-1.5 months in department stores and other retail outlets, as well as loans in the form of deferred payment);
- payment by installments: evenly repayable (monthly, quarterly) and unevenly repaid (the payment amount changes).