Types of Loans & Credit: Different Credit & Loan Options

Buy for borrowed money can be anything. But the terms of return for different types of loans will vary.

What are the loans

Target loans

The bank provides funds for specific needs. In most cases, you do not even see the money: the credit institution immediately transfers it to the seller. When it comes to large loans, the bank may request a security deposit and down payment.

Mortgage credit lending

This type of loan is often simply called a mortgage, but this is not entirely true. Mortgage is a form of collateral in which the debtor owns and uses the property, but the lender can sell it if the obligations under the loan agreement are violated. One of the most common forms of mortgage lending is the purchase of a real estate object on credit, which will be the key.

The mortgage is characterized by a long term loan and a relatively low interest rate (the weighted average rate on mortgage loans in July 2018 is 9.48%, for other loans, except car loans, for a period of one to three years – 15.39%).

With the help of mortgage lending you can purchase:

  • an apartment in a new building or on the secondary market;
  • house;
  • land plot;
  • cottage;
  • garage;
  • company.

And this list of objects for the mortgage is not limited. For example, you can take a loan to build a house, laying the land or the right to rent it.

When buying a home on credit, the State Register of Real Estate Rights indicates that the object is pledged. It is possible to remove encumbrance after repayment of the loan. Prior to this, the property owner cannot enter into transactions with it without the knowledge of the bank.

Car loan

This is a special loan for the purchase of a vehicle, in which the car remains pledged to the bank. And so that the debtor does not have the temptation to sell the car, the TCP is stored in a financial institution. You can pick up the document when the loan is fully repaid.

Salons often offer the most attractive car purchase conditions to car loan recipients.

True, they are most often compensated for the need for a CASCO with the maximum set of risks for the entire loan period.

Thanks to insurance and pledge, the bank can offer a not very high interest rate. In June, it averaged 14.83% pa when buying a new car.

Student loan

The purpose of the loan is clear from the title: the money goes to pay for education, and usually we are talking about universities. However, lending conditions can vary dramatically.

Some banks give loans to students. In this case, during study, the debtor pays only interest for the use of money, he will begin to return the principal debt after receiving the diploma.

Some financial institutions prefer not to risk and set the lower bar for the age of the borrower. For example, it may be 21 years. In this case, it is assumed that the loan will be taken by the parents of the applicant or he himself is already firmly on his feet, since yesterday’s graduate of the school does not fit the conditions.

Targeted consumer loans

This group of loans includes loans for the purchase of household appliances, travel packages, construction operations, and medical services. If you buy a fur coat on credit in a fur shop, it also fits into this item.

Usually the amounts are small and no deposit is required. Conditions largely depend on what the store has agreed with the bank.

Installment in this case is also a type of target loan. Just a commercial institution sells goods to the bank cheaper than you, and the difference then goes to the income of the financial institution in the form of interest.

Refinancing

Refinancing a loan is getting a new loan from another bank on more favorable terms to pay off the old one. In essence, a financial institution entices a client from a competitor. It extinguishes your loan to another bank ahead of schedule, and then you pay the new creditor both the principal and the updated interest. You get a lower rate, a financial institution – your money.

Non-earmarked loans

Non-earmarked consumer loans

You just take the amount you need in the bank and spend it at your discretion. But since the bank does not receive collateral and cannot control your spending, it insures its risks with higher interest on such loans.

There are non-earmarked loans that are disguised as targeted ones. You request money for specific expenses, and the bank takes this into account when approving a loan. However, in fact, the institution cannot control you. For example, businessman Fedor Ovchinnikov opened a bookstore, taking money from a bank for repairs .

Any microloans

Small amounts that are issued to the client almost without checking his integrity and with a minimum of documents. But the interest rate on these conditions offer extremely high. Because of this, earlier, in case of non-payment, the debt of a person who applied to a microfinance organization could have increased tenfold in a year.

Now, by law The maximum overpayment on microloans can not exceed the amount of the debt more than three times. But this does not prevent institutions from charging penalties and fines.

Usually such loans are used by people who are unable to obtain a loan at a bank on acceptable terms.

Credit cards

You can borrow a limited amount from the bank and return it whenever possible. For cards, there is a grace period when interest on the use of money from a credit card is not charged.

How to use the card in order not to incur debts, Layfhaker wrote . If you follow the rules, you can do without overpayments.

Which loan to choose

First of all, it’s worth deciding whether you need a loan at all, advises Sergey Leonidov, general director of the Financial Agramer “Sravnit.ru”. He does not recommend taking loans of two types:

  1. In stores for the purchase of goods – furniture, electronics and so on. It will be easier and cheaper to save up in order to avoid a very large overpayment for the goods.
  2. Mortgage loans to microfinance companies due to huge interest rates.

Other forms of loans have their pros and cons. For example, mortgage and car loans make sense when you really need a large amount for a long enough period. For such loans, you can apply for benefits from the state, the developer or car dealer. But you will not be able to dispose of the property, so if you need a relatively small amount, then you should look at the conditions for off-purpose and unsecured loans.

An important point for any loan: you need to carefully deal with all the conditions for payments.

Carefully study the market. It is not necessary to bypass all banks, in order to find out the conditions, you can look at them on the websites of financial institutions or in special aggregators.

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