Types of loans

Dacey Rankins

Membro

Iscritto: 2023-09-14 20:10:55

2023-12-04 18:09:04

Loans can be classified into different types and forms.

The forms of credit are closely related to its structure and, to a certain extent, to the essence of credit relations.

The structure of a loan includes such basic elements as the lender, the borrower and the value that the lender lends to the borrower (the so-called loan value).

Thus, according to the nature of the value transferred for temporary use, credit is divided into three forms.

Commodity
.
It is a loan in which goods are loaned, and after a certain period of time, the goods of a higher value are returned. Today, this form of credit is typical mainly for countries with a low level of development of credit relations.
Monetary
.
The most common form of credit today, which is the transfer of funds from the lender to the borrower on the terms of payment, repayment and maturity.
Mixed
.
The loan is issued in the form of goods, and its repayment takes place in monetary terms, which exceeds the approximate value of the goods.

According to the main groups of borrowers, the following forms of loans are distinguished:

individuals (citizens);
legal entities (companies, organizations).

According to the purpose of using borrowed funds, the loan is divided into:

target;
of a general nature (non-targeted).

Loans can be granted in national or foreign currency.

On the basis of payment, the loan can be interest-bearing or interest-free.

According to the type of lender, the following forms of loans are distinguished:

banking, including interbanking;
commercial;
state;
international (foreign).

Commercial credit means that the lender is not a credit institution, the loan is granted in the course of a trade transaction, so it is also called a trade loan. A loan can be granted by any entity that temporarily has free funds at its disposal.

Public credit is a form of government borrowing from households, legal entities, or foreign countries that are made in order to cover the state budget deficit or to finance government spending.

With the help of public credit, the state activates additional financial resources and can finance general public expenditures, that is, better perform its functions.

International credit is the granting of loans in commercial or banking form by creditors of one country to borrowers of another country.

Funds for international credit are mobilized on the international loan capital market, on national loan capital markets, as well as through the use of resources of state, regional, and international organizations.

The most common form of credit in everyday life is a bank loan. Let's take a closer look at it.

Bank loan

A bank loan is classified according to its basic features, such as the purpose of its receipt, the term of its provision, the method of repayment, etc.

According to the intended purpose, bank loans can be of various types, for example: consumer loan, mortgage, car loan.

Consumer credit is provided both in the form of a bank loan (consumer loan) and in the form of commercial credit (sale of goods with deferred payment).

Note!

Consumer credit is associated with lending to the population by banks.

Consumer credit allows people to purchase goods and services before consumers are able to pay for them.

Thus, consumer credit provides an increase in the standard of living of people.

According to the terms of crediting, bank loans can be:

indefinite (on demand);
short-term (up to a year);
medium-term (
Long term.

According to the availability of collateral, loans are divided into:

unsecured (blank);
secured (pledged, guaranteed, and insured).

There are types of loans in which the provision of collateral is a prerequisite. These include: mortgage, pawnshop, car loan, etc.

A mortgage loan is the provision of funds on the terms typical of a loan, secured by real estate (land, housing, etc.).

This loan is mainly for long periods.

In other words, a mortgage loan is a long-term loan that is provided for the purchase of real estate. You can buy:

Earth;
industrial premises with land;
private houses with land;
privatized apartments;
Apartments under construction.

A Lombard loan is a short-term loan in cash secured by easily realizable movable property (as a rule, jewelry).

The following can be used as collateral:

securities deposited with a bank;
precious metals;
miscellaneous goods (for organizations/enterprises, the bank accepts goods as collateral);
Cars;
antiques;
expensive clothing, for example, fur (such a loan is called a material loan);
utensil;
furniture;
Household appliances are in working and good condition.

A car loan is a special-purpose loan.

The purpose of providing funds is determined immediately - it is the purchase of a car, and the client will not be able to spend the money for other purposes, since the transfer of funds to his bank account, and even more so the provision of a cash loan, is not expected.

With a car loan, banks accept the purchased car as collateral.

According to the size, loans are divided into small, medium, and large.

In terms of the form of provision, there are:

one-time loans;
credit line;
overdraft.

According to the method of repayment, there are:

Loans repaid in a lump sum (payment).
Loans repaid in installments (installments) during the entire term of the loan agreement.

Among the methods of loan repayment, there are also the following:

Annuity;
Differentiated.

Annuity repayment is the repayment of debt in equal installments.

In this case, the borrower pays a monthly payment of equal amount, which includes the amount of accrued interest on the loan and the amount of the principal debt.

An annuity payment is calculated using compound interest.

Differential repayment is repayment in installments decreasing from the balance.

This is a payment that involves the repayment of the entire amount of the principal in equal installments, which are increased by the interest accrued on the balance of the principal.

Therefore, when applying for a loan, the client needs to pay attention not only to the size of the interest rate, but also to other details, such as the type of loan payments.

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Types of loans

Dacey Rankins