What are the Types of Loans and what are Their Characteristics?
A bank loan is a transaction where the lender provides the borrower a certain sum of money by a means of contract which states that the borrower has to repay the money to the lender within a particular time frame. Normally, the money loaned by the bank also accrues some interest that has to be paid which will be based on the kind of load requested. Hence, a bank loan is a commitment that should always be taken seriously. If you are looking for Online Instant Approval Loans | No Credit Check | SlickCashLoan, get in touch with us today.
What does a loan entail?
In order to keep away all the confusion and queries before you apply for a loan, get acquainted with what the loan entails.
- Capital: amount of money borrowed from a bank
- Interest: price the borrower has to pay to the bank to use the loaned money
- Term: period of time mentioned in the contract where you can repay the principal as well as the interest.
There are two major categories of loans: personal loans and mortgages.
- Personal loans are the loans which are used to finance the customer’s needs over a certain time period. The principal or the sum of money requested, is usually small for these kinds of loans. Personal loans entail consumer loans as well as student loans. The former is used to finance durable consumer good like a car. On the other hand, student loans are designed in such a way that it covers the costs of the graduate as well as the postgraduate studies and university exchanges.
- Mortgages are meant to finance the property acquisition and many times, to set up a business. It also involves a huge sum of money than a personal loan. Mortgages also offer the bank with a security interest. In other words, if the customer doesn’t repay the loan, the bank can sell away the mortgaged property in order to recover the loan money or to gain ownership of it.
Apart from these, loans are also varied depending on whether they are subject to guarantee or not. When a loan is requested, a guarantee is used in order to confirm that you will pay heed to comply fully with the financial obligations. The guarantor deems that they will honor the guaranteed entity’s commitment to pay back the lent money as well as the interest if the borrower is not able to.