Basic types of loans that you need to know
What are the types of loans that can be obtained on the banking and non-banking market? What is the difference between consumer credit and consumer credit? For what credit purposes can you use your own real estate mortgage? Here is the basic information about loans available to individuals and entrepreneurs.
What are the types of loans?
Loans can be divided into different groups, depending on the criteria used. This can be, for example, lending time, division into types of loans according to the currency or the institutions that grant them. Each of them will be right, but the most important is that it is a functional division and facilitating movement in this area.
A good criterion for the distribution of loans is to distinguish the groups of recipients to whom specific offers are directed. An important argument behind this is even the common formal conditions on which they are granted. Therefore, the first important group will be loans for individuals, also operating under the name loans for the population. The second group is corporate loans. From this first group, it is worth separating several of the most popular types of loans for which individuals reach. These are: consumer loan, mortgage loan and consumer loan.
Types of consumer loans
Consumer loans are also called individual loans, i.e. loans for individuals. As the name implies, a consumer can apply for it. Therefore, consumer credit can only be used for private purposes, and therefore credit for business or professional activities does not fall within the scope of those purposes.
The legal basis defining what a consumer loan is and regulating the rights and obligations associated with taking it is the Consumer Credit Act of 12 May 2011. The basic legal definition of consumer credit refers to the maximum value of the contracted liability, which is $ 255 550. It may also be the equivalent of this amount in a currency other than the Polish zloty.
The Act also defines the legal forms of contracts that can be concluded as part of granting a consumer loan. These are:
- loan agreement,
- loan agreement in accordance with the provisions of the Banking Act,
- revolving loan agreement,
- a contract for deferred payment of the benefit, if the consumer bears the costs associated with this deferment and
- credit agreement, in which the lender made a commitment to a third party, and the consumer himself undertook to return to the party the contract of the performance fulfilled.
The provisions of this Act apply to all types of loans that meet its requirements. Therefore, it should be a loan for natural persons – consumers and should not exceed $ 255 550. So what are the types of consumer loans we know that many of us use or can use? Consumer loans are: cash loans, loans for an apartment or a car, credit cards – debt on them, credit under a current bank account, non-bank loans. Thus, they include both bank and non-bank loans, provided they meet the abovementioned statutory requirements.
In the context of individual loans, attention should also be paid to consumer loans. This is a special type of loan that individuals can apply for. It should be noted at the outset that consumer credit is not the same as consumer credit. This is not even a particular type of consumer credit, because it is not covered by legal provisions that just define consumer credit. The only common ground for these two loans is the borrower, i.e. a natural person.
Consumer loans do not have a strict legal definition. These are bank loans – only these institutions can grant them. The terms of granting are set individually by the lender and borrower. There are no upper limits here for consumer credit. The purpose of granting it also does not have to be defined in advance, so the funds received can be spent in principle at will.
Types of mortgages
Mortgages are long-term loans. Their basic security is a real estate mortgage, which is established as part of a contract for the bank. Depending on the purpose of the loan, we may be dealing with:
- mortgage – a goal is to buy an apartment, plot, build a house,
- mortgage – any purpose, allocation of funds,
- consolidation mortgage – the goal is to consolidate and reduce installments of previously paid loans,
- refinanced mortgage – enables the transfer of credit obligations to another institution and negotiating more favorable repayment terms.
Types of corporate loans
Company loans are the second, large group that can be distinguished from the available offers. Of course, the basis for applying for it is not doing business. Lending to businesses is a common market practice. Depending on the purpose of purposeful business loans, four types can be distinguished.
The first is the credit limit within your current account. It is a short-term debit, renewable, with a certain debt limit. It is repaid on a regular basis as soon as the account receives the receipts.
The second type of company loan is working capital loan used to settle current liabilities of the company. It may be in the form of a credit line or be regulated as tranches of a certain amount and repayment date. Its conditions are set individually with the banking institution. It can be a revolving or non-renewable loan.
An investment loan is another type of loan. As the name suggests, this is an earmarked loan for company investments. It can be in the form of installment or one-time repayment. In the first case, the maximum loan period is 60 months, in the second case – 6 months. It should be fully used at the end of the investment.
The last, fourth type of loan used by companies is a loan for indicated investments. It is also a special-purpose loan, with the difference that the investment objective is narrowed. As a result, companies can count on better credit terms.