Loans: Generalities and Features.

The loans granted by banks have general conditions that are very similar among lenders. Thus, one of the main features is the amount of money we can receive through a loan, ranging from a few thousand USD to tens of thousands. The terms of payment of loans, ranging from 1 month to 5 years and, in some cases, up to 10 years, are also standard.

Among the rest of the general conditions of the loans, it is understood and accepted by both parties that the loan applicant, that is, the borrower undertakes to meet the payment deadlines on a regular basis.

Before signing the loan contract, the lender analyzes the applicant’s economic situation to determine if it is feasible for him to pay the loan without problems.

The documentation necessary to request a loan includes identification and income documents of the applicant. From this, the financial institution studies the specific situation of the borrower and, if necessary, requests more documents. If after the loan study period all the requirements are adequate, the entity proceeds to grant it after signing the contract that determines the conditions that both parties must meet. advertisements

Characteristics of the loans

Characteristics of the loans

On the other hand, there are specific characteristics that may vary on each loan. These types of conditions depend directly on the reason why the borrower is requesting the loan and the purpose it will give to the capital. In this context, there may be many reasons, from the purchase of a durable or not good, the financing of studies, etc. This is the reason why there are so many types of loans for each client’s purpose.

As for the characteristics themselves, we can define the following as the most common:

  • Documentation: As the name implies, it will be the documents that we must provide to the bank before formalizing the loan. I recommend that you read documentation to provide when requesting a loan
  • The interest rate: In summary we could say that it is the amount of money that the entity will charge you for the service of lending you the money. I recommend you go to our article on interest rates on loans
  • Amortization: The action of paying a debt by paying the installments is what is known as amortization. You can go to our article on repayment terms, where you will find more extensive information on payment terms.
  • Commissions: Amount of money that a financial entity receives to cover the management costs of a loan. Here is more information about loan fees
  • Non-payment: Little to say about this aspect, but you have incurred non-payment you will be interested in our post on embargo for non-payment

Differences between loans and loans

Differences between loans and loans

Very often, the terms loan and credit are used interchangeably to refer to the situation in which an entity lends money to a person who is responsible for returning it within the agreed time. Despite this widespread habit, there are certain notable differences between both terms that can be taken into account to have a better understanding of financial services.

On the other hand, the credits can be renewed in successive occasions without this entailing a large number of procedures. On the contrary, a loan must be paid in full and to apply for another one, another contract must be signed. This is one of the big differences between these two concepts.

In addition, each type of service is oriented to a different use. Usually, the credits respond to a customer’s need for consumption while the loans are made so that the customer can make payments that, otherwise, he could not make.

The differences between these two terms should be taken into account, although it is true that they are often confused as synonyms. The online lending system so in vogue currently grants credits, since both the amount and the repayment term are limited and reduced. In addition, these small credits or microcredits respond to the economic needs of individuals, and even small businesses. Usually, they are requested to make payments, make purchases or pay for services.

Today, getting a loan is complicated due to the numerous restrictions of the banking entities. However, it is possible to obtain credits in these same entities or to resort to the online microcredit system to get out of more than a hurry in times of crisis.

In personal loans, for example, no guarantee is required, but in others, such as mortgages, the same asset whose purchase is the purpose of the loan is the guarantee. The specific conditions are determined by competition between financial institutions, as they all want to give attractive offers to customers. Offers change every season and adapt to the needs of customers.

Due to the crisis, some personal loans are currently more difficult to obtain and the applications have dropped considerably. This is because the entities cannot afford the risk of lending money to individuals who may fall into default and, therefore, have been forced to restrict concessions.

Factors that determine the type of loan.

Factors that determine the type of loan.

Before applying for a personal loan it is very advisable to inform yourself to a large extent to make an appropriate decision. There are many offers in the creditor entities to meet the needs of all customers and, therefore, it is our duty to find the one that best suits us. Otherwise, we could lose great long-term benefits or not take advantage of all available facilities.

First, the purpose that we are going to give the capital we receive determines the options offered by the entity. We must also carefully consider the amount requested and the repayment term of the loan, since the interests we are going to pay to the entity depend on it. The payment term is decisive in the price that we are going to pay for the loan as commissions.

When we have determined the type of loan, that is, the purpose for which the money we need is used, we must turn to comparators ourselves. This allows us to see the advantages of applying for a personal loan to one entity or another since the fees and characteristics are not the same in all entities.

We must devote the necessary time to this step to be able to decide effectively. The difference can be a few USD, hundreds of USD or even thousands at the end of the life of the loan depending on the amount borrowed.

Another of the determining factors when hiring a loan is the interest rate. It is very tempting to blindly opt for the lowest interest rate, as we can think that this factor necessarily determines that the commission will be lower. However, this is not true. The loan payment term greatly influences and not only the interest rate. In other words, it is not the same to finance a year than five years, depending on the amount we are lent.

The most appropriate is to check the numbers ourselves or call on the help of someone who can clearly explain what the loan will cost us. In general, we will have to decide between a few options, maybe just two at the end of our decision period on the loan we choose and, in this step, it is crucial to know the price that each of the options supposes for our pocket. As a final step, it is advisable to verify that we will have enough money to pay the installments for the duration of the loan.

So far the article today. We remind you that you can visit the home page of our web-site to stay up to date on everything related to this type of financial products.