Types of bank loans
Although banks do not only grant loans, they dominate the credit market. This is why borrowers are more likely to encounter different bank loans. It is these that our article focuses on and looks at the key features of lending.
The participants in credit relations
Each type of credit is entrusted to at least two parties. The first is the lender, who may be an institution or an individual. The lenders will lend money for a purpose, like buying a phone, computer, flat, or car.
The second party is the borrower. The clients of the lenders receive the amounts agreed upon in the contract. The borrowers do not own the money. In this case, the funds are on a temporary basis and are given by banks for up to 10 years or more. It depends on the company's policy.
Classification of loans
Loans can be classified in many ways. A prime example is the interest rate. The latter is divided into three types - positive, interest-free, and negative.
If we take the substantive form of credit as a basis, experts distinguish three varieties:
Commodity.
The form of credit involves the transfer for a certain period of something, which is established according to the generic characteristics. Such types of credit are leasing of special equipment, installment loans for goods, rental of property, etc.
Monetary. The most common form today. After the loan has been taken out, the borrower is given a fixed amount. After the given period, he commits to return the money and pay interest for its temporary use.
Mixed.
This type of credit is used when the loan is in the form of merchandise but is repayable in money. It can also be applied in the reverse direction (money => commodity).
Additionally, loans are distinguished according to their purpose - consumption or production.
Production credits include commercial and export credits. The essence is the same - the provision of money and goods. However, the type of credit for exports, as the name suggests, is applied in foreign trade economic activities.
Consumer loans are divided into several types.
Non-purpose ones are required to meet urgent needs. This includes credit cards. Non-earmarked ones are typical for cars, travel, real estate, and other markets.
Finally, loans are divided by internal structures (say, revolving loans) and by the status of the lender/borrower. A distinction is made between the international, bank, civil, government, and interbank lending. Loans to legal entities are also widespread click here to find out more.
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