July 17, 2018 People borrow money from time immemorial. It is difficult to know exactly when they began to demand interest. Already in ancient times, the borrowed cow was expected to be reared, and the grain – with some crops. Today everyone lives on credit. And ordinary people and companies, institutions and even countries. What are the types of loans? The classification of bank loans will allow you to recognize each type of liability.
Bank loan – definition
What is a loan? The concept of credit is defined in the Banking Act. Pursuant to its provisions, by concluding a loan agreement, the bank undertakes to make available to the borrower, for the time specified in the agreement and for a set purpose, a certain amount of cash. The borrower may use this money in compliance with the terms of the contract. He is obliged to pay the debt back together with interest and commission within the set loan repayment date.
The most important condition for granting a loan is the creditworthiness. It is the ability to pay the debt within the prescribed time. In order to confirm its financial capabilities, the borrower must submit documents and information that will allow the assessment of this ability. If the bank decides that its creditworthiness is not sufficient, it may require collateral for the loan. There are different types of loan collateral: in person (e.g. surety or blank promissory note) and in kind (e.g. pledge on property and rights or mortgage).
Features of a bank loan
Each loan granted by the bank is a loan:
- cash – the subject of credit is money,
- returnable – the borrower undertakes to return the money in accordance with the agreed loan period,
- intentional – the bank grants a loan for a specific purpose,
- payable – the lender charges a commission on the loan granted and charges interest on the funds used,
- secured – the bank protects itself in case it cannot be repaid by the borrower.
Functions of a bank loan
Loans are of great importance both to customers who thanks to them obtain the necessary cash injection, but also to the state economy.
The three main functions of credit for the economy:
- Issuing – putting new money into circulation,
- stimulating – using credit policy instruments to stimulate economic development and production factors,
- profitable – reaping financial and economic benefits.
What is the loan procedure, the final result of which is the loan agreement and cash withdrawal?
The credit procedure at each bank looks similar. It can be more or less demanding, depending on what types of loans you apply for. The easiest way is to get a cash loan. With lower amounts, a bank statement is sufficient, with a higher one you will need a certificate from your employer or PIT.
Credit procedure – stages:
Applying for a loan online or at a bank branch.
- Acceptance of the loan application and customer assessment based on the documents provided
- Assessment of the applicant’s creditworthiness.
- Granting of a credit decision.
- Determining the terms of the contract and signing the loan contract.
- Starting a loan and transferring funds to a customer’s account.
Important – before signing the loan agreement, we should carefully check the information it contains.
What does the loan agreement look like?
The loan agreement comes into effect when it is signed. According to the Banking Law, it should be in writing and specify issues relevant to both parties.
The loan agreement is to specify in particular:
- parties to the loan agreement,
- the amount and currency of the loan in which it was concluded,
- loan purpose,
- loan repayment rules and dates,
- loan interest rate and interest rate change conditions,
- method of securing loan repayment,
- the amount of commission for granting a loan, if the contract for particular types of loans provides for a commission,
- the scope of the bank’s rights regarding the control of loan utilization and repayment,
- the date and manner of making the cash available to the borrower,
- conditions for making changes to the loan agreement,
- terms of termination of the loan agreement.
Credit agreement – template
What should a sample loan agreement look like? The document template can be found on the lender’s website, the services of which we intend to use. Let’s analyze the next points of the contract to make sure that they are understandable to us. Issues of particular importance to us are the loan amount, the size and number of installments, and the loan period.
Types of loans for individual clients
We will start the division of bank loans by distinguishing the most important types of loans for individual clients.
One of the most popular types of loans is consumer credit, also called a cash loan. The money that we get through it can be used for various purposes, for example to renovate a home.
Features of consumer credit:
- high amount up to PLN 200,000,
- matching loan period,
- convenient interest rate,
- simple loan granting procedure,
- the need to have a positive credit history, permanent job and regular salary,
- quick withdrawal to your hand (cash loan) or to your account (non-cash loan),
- one-off or installment repayment,
- numerous promotions releasing from additional fees.
The best loan offers for individual clients can be found in the cash loan rankings. In the first places of the list you can often find:
- cash loan in T-Mobile Usługi Bankowe – loan up to PLN 200,000, without income certificates and the need to visit the branch. The maximum loan period is 10 years. The lender accepts various sources of income, including a mandate contract,
- cash loan at PKO Bank Polski – loan up to PLN 120,000 with a maximum loan term of 8 years. If we refund money sooner, we will avoid fees. In case of repayment problems, we can take advantage of a 3-month credit holiday,
- Getin Bank cash loan – a loan of up to PLN 200,000 from 18 years of age. The maximum repayment period is 10 years. The lender guarantees a quick decision and mobilization of the loan.
Consumer and consumer credit
Consumer credit has no legal definition, it concerns the way of spending – that is, consumption. Consumer credit is protected by law, and more precisely by the Consumer Credit Act, which specifies, among others rights and obligations of borrowers. Consumer credit is granted to a consumer, i.e. a natural person, up to a maximum amount of PLN 255 550.
The Consumer Credit Act guarantees, among others:
- clear and clear information about the loan,
- the possibility of withdrawing from the loan agreement within 14 days of signing it,
- early loan repayment option.
The second type of loan granted to individual clients is a credit card. It is a convenient means of payment, used for non-cash transactions. It can be a kind of reserve buffer of financial resources.
- Credit Card Features:
- associated with the customer’s bank account,
- granting a credit limit depends on the customer’s creditworthiness,
- timely repayment exempts from interest (so-called grace period),
- exceeding the limits involves additional fees,
- universal and functional means of payment, which allows, for example, to pay in stationary and non-stationary stores, book holidays and rent a car abroad,
- equipped with elements that allow it to be identified and ensure the security of transactions.
The third type of loan is a mortgage. It is worth noting that these types of products are becoming more and more popular. This was probably due to the new Mortgage Act, which provides greater consumer protection.
- long-term liability with a mortgage security,
- most often granted for the construction of a house, purchase of an apartment or purchase of a construction plot,
- high loan amount,
- requires own contribution,
- the possibility of taking out a mortgage in the currency in which we receive remuneration or have the majority of savings,
- relatively low installment,
- long loan period – up to 35 years.
Remember: a mortgage and a mortgage are not the same. Although in both cases the collateral is real estate, we can use the mortgage loan freely. We must use the money from the mortgage loan for purposes related to the secured property.
Mortgage loans are a commitment for years. That is why many people decide to overpay their mortgage, limiting the costs associated with servicing it.
The concept of reverse mortgage is related to the concept of mortgage. Which means? It is the transfer of property rights to a bank, resulting in a lifetime pension for an apartment. The bank pays money once or in installments. After the borrower’s death, the family can buy the apartment again, paying off the debt and taking ownership of the property.
A consolidation loan
A consolidation loan is a type of loan that combines several smaller liabilities into one. This makes it easier for the borrower to pay off debts. It regulates one installment, which is a smaller burden on the household budget.
Features of the consolidation loan:
- lower interest rate,
- more favorable installment,
- longer loan period,
- the need for creditworthiness – the bank wants to be sure that we will pay back the debt,
- the possibility of paying off various types of loans.
Types of corporate loans
Entrepreneurs can also use the banks’ offer for start and development of the company. Especially at the beginning it is difficult to influence. Continuous costs and lack of income can effectively demotivate us. But you can’t give up – that’s not why we set up our own business to give it up right away. What are the types of business loans? Let’s explore the two most important types of loans.
The first type of corporate loan is working capital loan. It is used to finance the company’s current operations, e.g. covering the costs of employing employees or purchasing small equipment.
Features of working capital loan:
- guarantee of financial liquidity of the company,
- no need to specify the financing target in advance,
- credit period tailored to the client,
- flexible conditions,
- no security
- the possibility of multiple repayment and restarting the loan,
- quick credit decision,
- overdraft or credit account loan,
- option to choose the currency of the loan.
An investment loan is the second type of business loan. As the name suggests, its purpose is to finance investments made by the entrepreneur.
Investment loan features:
- granted to increase the company’s potential and increase profits,
- finances the purchase of tangible or intangible assets of the company,
- long loan period,
- individually determined interest rate,
- own contribution required,
- the need to present a business plan,
- one-time repayment or in installments,
- the need to establish collateral for the loan.
Credit and loan
Online loans are a great alternative to bank loans when you need less cash. They minimize formalities, so getting them is simpler, faster and more convenient. Lenders guarantee us two types of loans:
- Payday loans – including the first loan for free with APR 0%. If we refund the money on time, we avoid costs. The maximum loan period is 60 days,
- Long-term loans – we divide the repayment into installments not charged to the budget. The maximum loan period can be up to 48 months.
Entrepreneurs can also choose from a wide range of loans for companies. Can we apply for payday pay if we have credit? Yes, if we do not have any arrears in payment of installments, we should easily receive financial support from non-bank financial institutions.
Types of loan – which loan to choose?
The types of loans are selected depending on our needs. Let’s not sign the contract lightly – let’s get acquainted with the offers of individual banks to guarantee the best conditions.
What to do when we have a loan and the employer terminated the contract? It’s best not to let this happen! Fate is different, luckily the loss of a job does not have to result in an entry in the register of debtors. We can even negotiate with the bank, trying to extend the loan period or temporarily suspend loan repayment. The main thing is not to wring your hands, but as soon as possible contact our lender to find a solution that will be mutually beneficial.