Many complain about over-lending and the difficulty of dealing with the burden of such loans, so they have to limit themselves a lot. However, these same borrowers live in their own apartments, drive prestigious cars and even permits to rest on the turquoise blue seashore. Would they have it all if there wasn’t such a large range of loans we can currently see in the financial instruments market? Probably not. To get a more detailed understanding of how to get it all with bank credit, let’s look at the most popular financial products by “niche”. The prospective borrower only has to find his own among all the bank loans and realize his plans without delaying them for the future.
Loans at the bank: what they tend to be
In total, a bank can have 7 credit categories. But that doesn’t mean that one financial organization will offer you the whole “seven” at once. That is what only the most prestigious creditors have . Many banks specialize in 3-4 programs, so along with your credit rating, you will also need to look for a range of investors that can offer you the service you need.
1. Target consumer credit
The main characteristic of this bank loan is that the borrower borrows money to buy a particular benefit . In other words, the contract defines from the outset exactly what will be purchased. Later, the bank pays for this purchase by transferring money from its account to the seller’s account, and then the borrower begins to repay the credit to the bank. Such consumer loans are widely distributed in hardware and electronics stores. For the benefit of the borrower, a bank agent is constantly present at the point of sale to assist with the prompt processing of the transaction.
2. Target consumer loans
Such bank loans differ from their “counterparts” with the “target” character in that the borrower does not have to report to the creditor to whom he will spend the funds. You can withdraw cash or transfer this amount to your credit card without the bank reporting your cash out. Because of this confidentiality, the bank charges you a higher annual rate than target lending, yes, the penalty for late payment will also be increased. In this case, it is important for the bank to repay the loan on time and fully repay it , so it tries to discipline its borrower in any way.
3. Car loans
Auto loans help borrowers buy new and used cars. For a new car, a loan at a bank will be much more profitable, a used car will cost more. In both cases, the bank will require the borrower to pledge the collateral in the form of a purchased machine.
4. Mortgage or mortgage
Today, this is the best home purchase option for young families, as it is rare for anyone to raise enough money to buy an apartment. Mortgages can be attributed to the target group, as the purchase is only financed by the bank, but the borrower only has to collect the necessary package of documents and present the real estate object of his choice. Upon approval of the application (the apartment must meet the bank’s requirements and differ in high liquidity), the bank transfers the money for the dwelling to the seller’s account, and the borrower now begins to repay the mortgage at the bank. It is one of the longest borrowings (over 15 years) where the buyer immediately becomes the borrower.
On the other hand, a mortgage can be extended to pledge loans, because a mortgage always involves a mortgage on the property. The collateral can be both the existing dwelling and the purchased object.
5. Credit for construction
In principle, it is the same mortgage, but with its own characteristics. In order to get a construction loan from the bank, the borrower must show ownership of the land on which the house will be built. You will also need to collect a number of permits from the public authorities and the building contractor who will be involved in the construction of the house. As a result, you go to the bank with a stack of papers and have them checked. If the creditor is convinced of the transparency of the transaction, you will be guaranteed an affirmative answer.
Generally, a construction loan is not issued in full, but in installments . This approach by the bank is even more advantageous for the borrower, as the interest will not have to be paid on the total amount but only on the balance of the funds granted.
6. Business credit and start up
Such bank loans have gained widespread demand at any business level. They can be used by both small entrepreneurs and a relatively large manufacturing company. Spending money can be on a variety of needs: purchasing raw materials, equipment, opening a new line, building a workshop or developing cutting-edge technology. Usually, a business loan is not issued in a bank in the same way: the company has to prove its success by presenting accounting reports, and also have to make a plan how the creditor’s cash investments will pay off.
7. Mortgage loan
This loan is often referred to as a “loan” at a bank. The pledge property can be a dwelling, garage, land or a car . Money can be spent for any purpose, so these loans are a bit like a non-target consumer credit, but in our case, the amount will be higher (up to 70% of the collateral valuation price). This type of credit does not pose any particular risk to the bank and is therefore relatively frequent. In the event of non-payment, the collateral property passes into the hands of the creditor.
Is it easy to apply for a loan at a bank
It is not possible to give an exact answer to this question. It all depends on your ability, and more precisely, how well you meet the bank’s requirements for the program in question. In any case, your bank will take into account your ability to pay and if you are in dire need of credit, it is better to collect the most comprehensive package of documents that will prove your financial well-being.