Bank loans: types and conditions

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Currently, bank loans have become a common source of funds for large acquisitions for both households and businesses. It is often difficult for an uninitiated person to understand the variety of loan offers and loan conditions.

Bank loan - the transfer by a credit institution to an individual or legal entity of funds on a fee basis with the condition of their return after a certain period.

Types of bank loans

In the economy there is no single division of loans into certain types. The following classification features are most often distinguished:

• subject of lending (individuals, legal entities);
• term (short-term, medium-term, long-term, on demand);
• purpose (consumer, car loans, investment, mortgage, retail, industrial, agricultural);
• presence of collateral (secured, unsecured);
• size (small, medium, large);
• repayment method (repaid in a single amount, repaid according to the schedule);
• viewinterest rates (fixed rate, floating rate).

Currently, bank loans, the banking system of Russia are undergoing changes: the number of loan offers is growing, their conditions are becoming more diverse.

Later in the article, we will consider in detail the most common bank cash loans for individuals and significant parameters of lending programs.

Consumer loans

Consumer loans are bank loans for urgent needs, the funds for which can be spent for any purpose at your discretion. A consumer loan may be the best option if the amount required is not large, and the speed and ease of obtaining money is very important. If you wish, you can get a loan on a bank card, account or in cash. Payment is possible through cash desks, ATMs and via the Internet. You can pay the loan with a bank card, cash or transfer from your account.

Conditions:

• Loan size: the minimum amount varies between 15-50 thousand rubles, the maximum - from 500 thousand rubles to 3 million. For clients with an impeccable credit history and payroll clients, the amount may be increased.
• Interest rate: depends on several parameters and varies widely across banks.
• Loan term: usually issued for up to 5 years, but can be extended for certain categories of borrowers or with expensive collateral. For example, Sberbank issues a consumer bank loan for up to20 years with real estate mortgage.
• Security: possible pledge, guarantee of individuals or legal entities, issuance without security.
• Deadline: 30 minutes to several days.

Benefits:

• A small package of documents.
• Simplified procedure for reviewing a loan application.
• Short term for extradition decision.
• There is no control over the purpose of spending money.
• The possibility of receiving money in hand.

Flaws:

• High loan rates.
• Low credit limit.
• Short term loan, and as a result, a large monthly payment.
• The maximum age of the borrower is lower than for other loans.

Credit cards

Conditions:

• Loan Amount: The maximum amounts on credit cards are usually low and amount to 100-700 thousand rubles.
• Interest rate: the highest rates of any loan, ranging from 17.9% to 79% per annum.
• Loan term: up to 3 years
• Security: not required.
• Deadline: from a few minutes to 1 day.
• Grace period: 50-56 days, during which no interest is charged if paid on time.
• Additional fees: there are often fees for cashing out and for accompanying the card. For example, the "Home Credit" bank card "Card with benefit" annually costs 990 rubles, and the "Useful purchases" card is free of charge.

Benefits:

• Presence of a grace period.
• Simple application approval process.
• Minimum processing times.
• Minimum set of documents.
• No control over spending money.
• Available by courier or mail.

Flaws:

• High interest rates.
• High late fees.
• Fees for ATM withdrawals.
• Low loan amount.
• Annual card maintenance fee.

Auto loans

Cars have become an urgent need, but there is not always enough money for such a purchase. Bank loans for the purchase of motor vehicles are called car loans.

Conditions:

• Loan size: limit of 1-5 million rubles.
• Interest rate: from 10% per annum for new and from 20% per annum for used cars.
• Loan term: up to 5 years, for larger amounts the term can be extended.
• Provision: purchased vehicle.
• Deadline: 30 minutes to several days.
• Down payment: usually 10-25%, but some banks also offer programs without a down payment.

Benefits:

• Low loan rates.
• More than a consumer loan.
• Short application processing times.

Flaws:

• The package of documents is larger than with the consumerlending.
• Short loan term and, as a result, a large monthly payment.
• The need for initial savings.
• Control over the spending of received funds.

Mortgage loans

The real estate market is actively developing, people tend to buy apartments and build houses. The main part of housing acquisitions takes place with the participation of banks. This is exactly what a mortgage loan is intended for - a loan for the purchase of real estate.

Conditions:

• Loan size: the amount of the mortgage varies from 100-300 thousand to 500 thousand-15 million rubles.
• Interest rate: depending on the lending program from 10.5% to 25% per annum. Among all types of loans, mortgage rates are the lowest.
• Loan term: varies from 15 to 30 years in different banks.
• Collateral: A pledge of a purchased or existing home.
• Down payment: from 10-25% of the cost of housing.
• Term of consideration: from a week to a month.

Benefits:

• Ability to process large amounts.
• Long term loan.
• Low interest rates
• Possibility to attract co-borrowers.

Flaws:

• A large package of documents.
• Long application processing time.
• Necessity to pledge real estate.
• Control over targeted spending of funds.

Parameterscredits

Before choosing a particular type of loan and loan program, you need to evaluate how profitable it is and analyze its main parameters:

• Interest rate.
• Repayment method.
• View of the repayment schedule.
• Base for interest calculation.
• Additional fees.
• Associated costs.

Interest rate

The spread of interest rates is quite noticeable for different lending programs, even in the same bank. Interest on bank loans depends on many factors, the most significant of which are as follows:

• Customer trustworthiness. Credit institutions prefer clients who receive a pension or salary from them, as well as borrowers with a positive credit history. For such categories of applicants, preferential interest rates are always offered.
• Term and amount. It is profitable for the bank to issue large amounts, therefore, with an increase in the amount, the rate decreases. And vice versa - the longer the term, the higher the rate. For longer periods, rates are higher sometimes up to five percentage points.
• Design speed. Express loans with a minimum list of documents carry a big risk for the bank, so such loans are sometimes 2 times more expensive.
• Goal. For targeted loans (for example, mortgage or car loans), the rate is always lower. Even within the framework of consumer loans, there are targeted programs with preferential interest (for example, for the development of personal subsidiary plots).
• Availability of insurance. Having life or job loss insurance can help lower the rate ona few items.

Types of repayment schedules

When drawing up repayment schedules, two breakdown methods are used: annuity and differentiated.

If the schedule is divided by the same amounts for the entire period, then it is annuity. This type of schedule is currently most commonly used by banks. The monthly payment in such a schedule consists of an increasing amount of principal and interest, and therefore is not as burdensome for the borrower as a differentiated one.

In a differentiated schedule, the amount of the principal debt is divided in equal amounts for the entire term, and the amount of interest decreases over time. At the very beginning of the contract, payments with this breakdown method are higher, but from the point of view of the total overpayment, it is more profitable. The amount of interest in a differentiated schedule for the entire term is lower than in an annuity, where the amount of the principal debt is repaid at first in small amounts, and the payment mainly consists of interest.

Interest base

According to the Regulations of the Central Bank of Russia, interest on bank loans is charged on the balance of the debt, however, some credit organizations indicate in loan agreements the initial amount of the issue as the basis for paying interest.

The first method, of course, is more profitable for the borrower, since the amount of interest will decrease with each repayment of the principal debt.

In the second option, the interest will not change during the entire repayment period, as they are calculated based on the original loan amount.

Additional fees

In the process of paymentloan, it may turn out that there are additional commissions, the presence of which is better to clarify before signing the loan agreement.

Banks provide for various commissions related both to collateral or an application for a loan, and to servicing and repaying it.

Associated costs

Accompanying costs may arise at different stages of obtaining and repaying a loan. During the consideration and processing of a loan, such costs are most often associated with collateral. For example, a pledge of real estate undergoes state registration, for which it is necessary to pay a state duty. When pledging vehicles in the traffic police, an arrest is made for registration actions also with the payment of state duty. Some banks provide fees for urgent consideration of a loan application or for assessing collateral. Such expenses are, of course, paid by the borrower.

One of the most expensive items of related expenses can be considered insurance: personal, property, CASCO, against job loss and more. Insurance usually needs to be renewed every year.

Despite the fact that the Russian economy is going through a difficult period, banks and bank loans remain in demand by the population of the country. Credit organizations offer a variety of lending programs, and, having understood the conditions, you can take advantage of them.