Types of loans and their features. The essence of the loan
Credit relations are an integral part of the market economy, which, in a simplified version, can be represented as the process of buying and selling money. The essence of lending lies in the movement of free funds from the lender to the borrower on the basis of a mandatory return, the limited period of use of funds in time and payment, that is, the accrual of interest in favor of the lender. In a market economy, many types of financial services fall under the definition of credit relations - leasing, banking, factoring, loans, microcrediting and much more.
Types of government lending
A state loan is a loan that is provided to a borrower at the expense of budget funds. The function of a lender in state lending is assumed by local authorities of various levels, or state bodies. Also, loans issued by a commercial bank, but subsidized by the state on concessional terms - for example, youth loans, mortgage loans for families with a certain number of children, concessional car loans, can also be classified as "state credit". issued by the Central State Bank are most often used for the following purposes:
- Lending to commercial banks;
- Lending to certain regions or industries for which budget funds have been exhausted and there is no way to get a loan from a commercial bank;
- Lending for international relations programs.
Types of long-term lending
Long-term loans are large loans issued for a period of more than 5 years. Such loans can have both a fixed interest rate and a rollover rate that changes depending on market fluctuations. The following target types of long-term loans are distinguished:
- Investment business loans to commercial organizations for the purchase of expensive machinery and equipment or replenishment of assets;
- Community loans for the construction of important government facilities;
- International loans and interbank loans.
Individuals can also borrow funds for a period of more than 5 years. The most common types of long-term lending to individuals include the following long-term loans:
- for the purchase of transport;
- Mortgage and land loans for the purchase of housing or land for processing;
- Non-targeted consumer loans (for example, for the purchase of equipment).
Types of home loans
There are two ways to attract outside funds to purchase real estate - a home loan and. It is necessary to distinguish between these two forms of lending. Choosing home lending, the buyer becomes the direct owner of the housing he purchases, i.e. housing acts as an object of ownership. In the event that the buyer chooses a mortgage, then the housing he is buying is a collateral for the loan, and the rights to it can go to the bank. In accordance with the current legislation of the Russian Federation, housing lending has the following forms:
- Land loan - a long-term or short-term loan for the purchase of land for residential construction;
- Long-term loan for the purchase of housing;
- Short-term loan to finance construction works for reconstruction or construction of housing.
Types of mortgage lending
Today, almost every commercial bank can offer several options for mortgage lending under different names. All of these options can be structured into several general categories. First of all, it should be remembered that a mortgage loan is a loan secured by any property. There are the following types of mortgages, depending on the collateral:
- Mortgage secured by a house or cottage;
- Mortgage secured by property;
- Mortgage secured by an apartment;
- Mortgage secured by the purchased housing.
Also, mortgage programs may differ depending on the type of real estate for the purchase of which they are designed, such as:
- Mortgages for cottages, townhouses and other suburban housing;
- Mortgage for housing construction for land owners who want to build a house on it;
- Mortgage for secondary housing;
- Mortgage for housing under construction.
Types of consumer lending
Personal credit is one of the most widespread and frequently used types of credit relationships. Such a loan is a loan for small legal entities or individuals, issued for the purchase of consumer goods - furniture, household appliances, medicines, utility bills. Consumer loans are of the following types:
- Target - can only be spent on the goods specified in the loan agreement;
- Inappropriate - can be spent on any needs;
- Without a guarantor, with a higher interest rate and a shorter term;
- With a guarantor, with favorable conditions and for a long time;
- Express loans in supermarkets and retail outlets;
- Bank loans issued at bank branches;
- Microcredits with a short term;
- Long-term loans.
New types of lending
The market economy presupposes the active development of new financial institutions, including new types of credit relations. Lending and its forms strive to adapt to the increased demands of market participants and offer more and more progressive forms and types of loans. One of these types in Russia is leasing, used by enterprises to purchase expensive equipment. Leasing allows you to use property by paying rent for it and then buying it back at its residual value. Individuals can use leasing to buy cars. Also, one of the new forms of lending in Russia can be considered banking, according to which an individual is granted the right to use a certain amount of money with subsequent payment of interest.
Main types of lending
All credit relations have a number of common features, by which the main types of lending in the modern economic system can be distinguished:
- The types of loans may vary depending on the terms. The international classification recognizes the following three types of loans, the terms of each of which may also differ depending on the country: long-term, medium-term and short-term loans.
- The number of creditors can also vary. There are loans with one lender, loans at the expense of banking consortia (associations) and syndicated loans (at the expense of a third party).
Loans can be provided in several forms - mono-currency (ruble, dollar), bi-currency (in two currencies) and multicurrency (in several currencies).
Today, a wide variety of people coexist on the financial market. To structure them, financiers began to divide them into groups according to certain criteria, for example, by the duration of the agreement, the type of interest rate, etc. A lot of such parameters are used, but among them there are several main ones.
The number of lending programs that banks offer to their clients is increasing every day. But knowing the parameters and properties of the loan product, it can be classified into one of the categories.
The first simplest sign by which the types of loans are determined is their validity period:
- if the contract is valid for up to 1 year - then it short;
- all loans over 1 year - long-term.
Usually, short-term loans are consumer loans, but long-term loans are taken by people to buy real estate and cars.
Loan classification by purpose
All types of bank loans are divided into:
- targeted;
- non-targeted.
Targeted loans provide for strict control of the creditor over the use of money, inappropriate loans enable borrowers to spend the loan on anything.
Typically, targeted loans are issued for the purchase of cars, real estate. They also include the kind of consumer loans that are taken for the purchase of a specific product or service, for example, household appliances, payment for educational services, etc.
What loans are also depends on the purpose of their registration. The standard classification on this basis is as follows:
- consumer - people take them to satisfy their consumer needs, for example, to buy a necessary thing, make repairs, pay for a certain service. In most cases, these are not targeted loans, which means that people can spend money at their own discretion;
- mortgage - this loan program is familiar to everyone who plans to solve their housing problem with the help of a bank. This is the name given to targeted loans for the purchase of real estate. The types of mortgage lending depend on the collateral: residential real estate (house, apartment), commercial real estate (office, workshop, hangar, etc.), land. Also, under the mortgage and mean consumer loans secured by real estate;
- car loans - These are targeted loans for the purchase of passenger cars and commercial vehicles. It can be used to purchase both new and used vehicles.
What is the difference between a mortgage and a consumer loan
The main differences are:
- the mortgage provides for the availability of collateral, a consumer loan can be without collateral;
- usually a mortgage is a targeted form of financing (except for consumer loans). The bank does not check where the money received under the unsecured consumer loan will go;
- mortgage programs for the purchase of real estate provide for the presence of such a parameter as an initial payment;
- buying real estate on credit is the most long-term product (issued for a period of up to 30 years), other forms of lending are concluded for a shorter period (usually up to 5 years);
- the interest rate on loans for home purchase is one of the lowest, for other loan programs the fee is higher.
Types of consumer loans
In turn, the following types of consumer loans are distinguished:
- card - provide for linking the credit limit to the main account. Using a credit card, you can make purchases or withdraw money in an amount exceeding your own balance;
- cash - in this case, the client is given money immediately through the bank's cash desk. Today, such loan products are practically not used anymore. It is becoming a common practice to issue a plastic card to the client, with which he can withdraw money from an ATM or cash register.
Types of security
There is another classification of loans and depends on what is the guarantee of the fulfillment of obligations under the agreement. According to this parameter, the following types of loans are distinguished:
- unsecured or blank;
- with a guarantee;
- with real estate collateral
- with a pledge of movable property;
- with risk insurance.
In order to reduce their risks, banks may also require a client to register several types of collateral at once, for example: sureties and real estate pledges plus insurance.
It should be noted that consumer loans in cash and credit cards are usually issued without collateral. If the desired amount is large, then the creditor may require a surety from one or more persons.
Let's take a closer look at the types of loan collateral:
- surety - by signing the appropriate agreement, the legal entity or individual agrees to fulfill the obligations of the loan jointly and severally from the borrower. In other words, if the latter stops paying under the contract, the bank applies to the guarantors to repay the debt;
- mortgage or mortgage of immovable property - usually an apartment or a house that is purchased on credit is a security for the fulfillment of obligations to the creditor. Also, a mortgage is issued when financing consumer loans for large amounts;
- pledge of movable property - in this case, in order to reduce risks, the bank takes as collateral transport, money or metals on accounts, shares, etc. The most popular program where there is a pledge of movable property is car loans:
- risk insurance - insurance services accompany almost every loan. So with a mortgage, the borrower must necessarily insure the property; for car loans, it is required to have a CASCO policy. Plus, banks can offer the debtor to insure against the risk of job loss, conclude a title insurance contract, etc. Thus, insurance ensures the fulfillment of obligations under the contract in the event of adverse events.
Loan financing forms
There are types of loans by forms of financing:
- credit line;
- overdraft;
- tranches;
- one amount.
Credit line
A credit line can be revolving and non-revolving. Renewable line quite often used for card loans. Its feature is the ability to use the credit limit again after repayment. It should be noted that interest is calculated only on the actually selected amount of the credit limit.
FROM non-revolving credit line you can get acquainted when applying for a loan for real estate construction. This form of financing provides for the gradual use of credit funds over a certain period. In other words, the borrower does not receive the entire amount at once, but in parts. Thus, you can save on interest, since they are charged on the actually selected limit amount.
Unlike a revolving line, a non-revolving line does not allow the borrower to borrow money again after the limit is repaid.
Overdraft
In its principle, overdraft is very similar to a revolving credit line. But if the latter provides for the opening of an additional account for the client, then the overdraft is convenient because it is tied to the main account.
Most often, overdraft is a companion of card accounts of participants in salary projects. The advantage of this form of financing is that the borrower, when he needs to withdraw from the account an amount exceeding the balance of his own money, and when the salary comes in, the loan is closed. You can also pay off the debt by replenishing the card.
The mechanism for repaying the debt under the credit line is somewhat different. Considering that the loan is recorded on another account, it is not enough for the borrower to simply replenish the card. He then definitely needs to transfer money from the card account to the credit one, otherwise the loan will not be closed in time and the bank will apply penalties.
Tranches
Tranche lending is used in the construction of houses. Here, money is issued not in one amount immediately after the signing of the contract, but in accordance with the schedule. This form of financing is very similar to a non-revolving line of credit.
Interest rate type
In addition to the above varieties, the types of loans are distinguished by the type of interest rate:
- floating - this means that the lender has the right to revise the contract fee at a certain frequency, depending on the size of a particular index. Usually the last is the rate Libor, Euribor;
- with fixed - the rate does not depend on the cost of monetary resources in international markets, and therefore cannot be changed until the end of the contract. Except in cases of penalties for violation of the terms of the contract.
As you can see from the above, how many parameters are used in the credit program, there are so many types of loans. It should be noted that the lending market is constantly evolving, therefore, more and more new types of loans appear and this classification is not complete. All the main features of loans and their differences are simply indicated here.
Alexander Babin
Loan products differ depending on the requirements for the borrower, the purpose of obtaining, the terms of repayment.
From the point of view of a banking organization, loans can be of two types. An active loan is a loan issued by a banking structure. This option is the most common on the market. Passive credit - the bank acts as a borrower, assets are provided by the state or other banks. The bulk of loans on the Russian market are issued to cover the expenses of enterprises or the daily needs of households.
Types of loans
Organizations, banks, government agencies, individuals receive and repay loans on different terms. For example, targeted loans for agricultural enterprises are characterized by low interest rates and long repayment periods. Types of loans:
- According to the term of use, loans are short-term (up to 12 months), medium-term (up to 5 years), long-term (over 5 years). Short-term loans are characterized by small amounts and high interest rates, long-term loans are issued for the purchase of housing, equipment, industrial buildings, etc.
- Depending on the guarantees provided by the borrower, there are blank (unsecured) and standard (secured) loans. The guarantee of the return of funds is property (pledge), surety (guarantee of a private person or organization), insurance payments.
- According to the repayment method, one-off (the borrower closes the loan in one payment for the entire amount of the debt) and loans paid in installments are allocated. The second method involves making several payments according to the schedule established by the bank; this type of lending is the most popular.
- Depending on the purpose of obtaining, there are industrial (to finance production), consumer (to buy goods), budget (to cover government spending), investment (for business development) loans. The conditions for issuing such loans depend on the financial policy of the state. For example, in Russia investment and consumer loans are the most accessible.
- According to the calculation method, bank loans are with a fixed (the cost of using funds is not revised) interest rate and a floating one. The second method involves changing the interest rate depending on the market position, which is not beneficial to the borrower.
- Depending on the method of issuance, loans are divided into two types: compensation - is a transfer of funds to the client's current account and payment - when the client is issued a credit card.
The classification of bank loans by size (small, medium, large) depends on the level of development of the financial sector. For example, in the Russian Federation, credits issued to one client and exceeding 5% of the bank's total capital are recognized as large.
The development of credit relations contributed to the emergence of new forms of obtaining a loan. In order to navigate the variety of loan products and help the borrower choose the right loan, economists have classified loans according to the main criteria.General classification of loans
Credit relations are distinguished by different forms of loans. All commodity-money loans are classified according to basic criteria:
Main forms and types of loans
Bank lending is the most in demand. Such a loan is provided exclusively in cash equivalent, has a broad purpose and is systematized according to the following indicators:
- maturity;
- security;
- repayment method;
- borrower category / purpose.
Bank loan: the main types of loans
Types of loans to individuals
Lending to the population is one of the most demanded banking services. Financial institutions have introduced special credit programs for individuals and small / medium-sized businesses. Loans to individuals are conventionally divided into 4 groups.
They are issued for the purchase of goods and payment for the services provided. This category includes loans for the purchase of appliances, household goods, loans for repairs, travel, etc.
- long-term loans, the purpose of which is the purchase of housing. The acquired real estate is secured by the bank until the full settlement of the loan.
The bank issues a loan to the client for the purchase of a vehicle (the financial institution directly transfers the money to the car dealership). Loan terms depend on the size of the down payment, loan amount and repayment period. Usually banks require the borrower to insure the car under the CASCO program (full vehicle insurance against damage and theft).
- a program that allows you to get cars, machinery and equipment for use. When concluding a lease agreement, the property becomes the property of the client only after the full purchase price is paid.
Types of consumer loans
Most consumer loans can be divided into several types according to the following main characteristics:
1. Purpose of the loan:
- targeted loans - the use of borrowed funds is negotiated with the bank in advance (purchase of equipment through an intermediary outlet, payment for training, repairs, etc.);
- inappropriate loans - the borrower does not notify the bank about the purpose of the loan.
2. Method of issuing a loan:
- registration ;
- transfer of borrowed funds to the account of the company selling inventory and services;
- in cash at the bank's cash desk.
- loan on general terms for all categories of clients;
- loan on favorable terms for students, pensioners, military, etc.
4. Type of security:
- unsecured loan is the most popular type of loan among the population, the main advantage is the lack of collateral;
- collateralized loan - the client provides the bank with movable / immovable property, a deposit or a guarantee of an individual as security.
5. Procedure for obtaining a loan:
- one-time loan - the loan is issued in one amount;
- revolving loan - the client can expect to receive credit funds within the period specified in the contract.
Types of mortgage loans
All mortgage programs can be divided into two main groups: targeted and non-targeted lending.
Target mortgage - a loan for the purchase of housing secured by the acquired or owned by the borrower / co-borrower / guarantor of real estate.
Non-target mortgage - issuing a loan for personal purposes of the borrower secured by real estate.
Banks' standard programs for obtaining targeted mortgages:
- mortgage on housing under construction;
- mortgage for the purchase of housing in the secondary market;
- loan for unfinished construction of a private house;
- mortgage for the purchase of land;
- loan for the purchase of suburban real estate.
Many banks provide mortgage lending for privileged segments of the population: young and large families, teachers, military personnel, police officers and Russian Railways.
Types of government loans
State credit is a system of public relations, where the state through authorized structures acts as a lender / borrower.
State loans are systematized according to the following criteria:
- validity;
- the status of the issuer participating in credit legal relations;
- category of the subject - holder of securities;
- yield type - form of payment;
- method of placement; loan form.
The most common method of government lending is bonds. The security certifies the right of the holder to receive its par value / property rights within the specified period.
International credit classification
International credit is the movement of funds between countries. The redistribution of capital takes place with the help of correspondent banks. The creditors are the state, banking institutions and monetary organizations. Borrowers: transnational banks (TNB), entrepreneurs and public authorities.
Types of international loans
- Getting a vehicle for personal use through leasing is more profitable than car loans. The loan is issued at a preferential rate, the requirements for the borrower are less stringent.
- A targeted loan is usually cheaper than other types of loans.
- without collateral / surety is more expensive than "collateral" loans.
Loan type this is a characteristic of loans by economic characteristics. The main purpose of lending is capital movement. The lender, not finding a better use for the funds, leases them to the borrower for a specified period with a subsequent return and a set fee. A loan is essentially a financial transaction with benefits for both parties.
To date, no uniform world standards have been established for dividing loans into types. In our country, loans are classified depending on the object of lending, payment, urgency of lending, its security, etc.
The main popular types of loans are: car loans, mortgages, consumer loans and cash loans.
Loan types.
By maturity, there are:
- Overnight - one night interbank lending;
- Extra-urgent - loan up to 3 months;
- Short-term - the loan is issued for up to a year;
- Medium-term - lending from 1-5 years;
- Long-term - maturity over 5 years;
- Oncol - presented in the form of a credit line, mainly used by brokers.
By security loan types distinguish between:
- Unsecured - a loan issued at the risk and risk of the lender, without a guarantee and any additional guarantees;
- Partially secured - the collateral against which the loan is issued only partially covers the amount of the loan, or the guarantor assumes the obligation to pay only part of the debt;
- Secured - the collateral against which the loan is issued fully covers the loan, or the guarantor guarantees the payment of the entire amount of the debt.
The types of loans are distinguished by payment:
- Interest is the most common type of lending. The borrower, borrowing money, undertakes to pay part of the debt, including interest, every period (month, quarter or year).
Interest-bearing loans can be divided into several more subtypes:
- Rollover - interest rates that apply mainly to long-term loans. These are loans without a fixed interest rate, which changes depending on fluctuations in the foreign exchange market;
- Fixed - interest rates remain fixed throughout the entire period of use of credit funds;
- Mixed - a loan containing a fixed interest rate (base) and variable (floating).
- Interest-free or targeted loan (issued for the purchase of a specific product) - an agreement is concluded between the bank and the seller and the seller pays the interest. At the same time, he compensates for the paid interest with an overpriced product. Less often, a large seller becomes a creditor himself and is ready to give an interest-free grace period.
- With a fixed payment - receiving loan money, partially or fully repaying them, the borrower undertakes to pay a fixed fee. This type of lending is quite rare.
By the purpose of issue loan types distinguish between:
- Target - loan funds are allowed to be used only for the implementation of the purpose provided for in the loan agreement. The most common are loans for housing (mortgage), car loans, land, educational, brokerage and, of course, consumer loans.
- Inappropriate - the money received in debt, the borrower has the right to spend at his own discretion.
Depending on financial and social status:
- Informally employed or unemployed - this includes the categories of people who are not able to prove their income (dividends, interest on profits, income from renting out housing, etc.);
- Individual entrepreneurs - the income of this category of people is difficult to control, therefore, the lending conditions are more stringent;
- Pension loan - the amount of such a loan depends on the amount of pension payments and the age of the borrower.
Depending on the lender:
- Usury - a loan that involves a very high interest rate and material collateral. Such type of loans occurs very rarely, mainly inherent in countries with a poorly developed credit system;
- Banking - a bank or a credit organization acts as a creditor;
- Commercial - a credit transaction between legal entities or legal entities and individuals;
- State - a loan issued by a state bank on special (more favorable) terms. Very often, credit programs for young families are called state-owned, for example: youth credit;
- International - an investment of money from one or several states, in another.