Loans allow you to finance a variety of purposes – from replacing home appliances to buying your dream apartment. They can be divided according to various criteria, among others subject of the contract, length of the repayment period. Banks offer many loan products under different names. Learn the basic types of loans for individuals.
The difference between a loan and a loan
Extremely often, the terms credit and loan are used alternately, although in reality they are two separate sources of financing. First of all, banks that grant loans are subject to the Commission for Banking Supervision. The laws regarding the rules for granting loans are regulated in very restrictive regulations. The entities that can grant loans are only banks. Read what are the most popular types of bank loans.
In contrast to loans, various entities grant loans, including natural persons. The activities of non-banking companies are regulated by a special anti-usury act and the loan agreements are governed by the provisions of the Civil Code.
Basic types of loans for individuals
1. Consumer loan: you get it for any purpose, and the repayment period usually lasts from several months to several years.
See what types of consumer loan collateral banks use.
2. Credit card: this offer depends on the credit limit granted by the bank, is associated with having a bank account.
3. Mortgage: as the name implies, this is a loan secured by a mortgage to finance the construction of an investment or the purchase of real estate. The repayment period may be spread over several dozen years.
4. Consolidation loan: this is an offer addressed to people who have several loans and have problems with their repayment. It enables joining several liabilities into one, thanks to which the Borrower pays only one installment, usually (due to spreading over a longer repayment period) in a lower amount, compared to the sum of individual installments of liabilities.
There are also other types of loans for natural persons, apart from those indicated above, enabling the financing of a given purpose, e.g. car loans or a targeted group of people, e.g. student loans.