Learn of the different types of bank loans and how they operate to bring benefits to both parties.
Whether through misfortune or just a need for money to finance a project, it’s possible to get into a situation where you need to borrow money, there are many places you can borrow money but the most common is the bank. So, what is a bank loan? Bank loans are monetary loans from commercial lenders. These types of loans will have a predetermined time duration together with interest, either fixed of adjustable.
The Different Types of Bank Loans
There are several different types of loans. The most common are car loans (used and new), credit cards, home loans (fixed & adjustable rate), business loans, student loans, and personal loans.
A bank loan made on collateral, such as a car loan and home mortgage, has security attached to this it. Therefore, if the customers is unable to pay his loan, the bank repossess the vehicle to protect its interest. This vehicle is sold to recover the outstanding balance of this loan.
Unsecured loans don’t have any security. This means the bank is much less protected. The unsecured loans include signature loans, credit cards and student loans. If the customer is not able to pay the unsecured loan, the bank may have to sue him/her to recover their funds.
The different bank loans available to customers today are as follows:
- Bridging loans
- Commercial loans
- Debt consolidation loans
- Guarantor loans
- Home equity loans
- Home improvement loans
- Installment loans
- Online loans
- Payday loans
- Quick cash loans
- Secured loans
- Small business loans
- Student loans
- Unsecured loans
The function of a bank loan’ is to provide a bank customer with funds to fulfill the purpose of that loan, and to give the bank the interest income. Many bank loans are made on collateral to protect the bank from loss in case of loan default.