The term “loan” comes from the Latin word creditum, which means “loan”. As a standard, a loan is usually understood as a certain amount of money or other valuable resource (goods, thing, electronic assets), which is issued by one person to another with an obligation to repay the loan after a certain time. Participants in economic relations can be both individuals and legal entities. The terms of the loan are negotiated in advance.

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Forms of lending
The main types of bank loans
Consumer loans
Credit cards
Car loans
Mortgage loans
The main parameters of a bank loan
The amount of the interest rate
Additional fees
Related expenses
Pros and cons of a bank loan
Forms of lending
The modern world economy is largely growing, thanks to the successful development of the credit system. The principle of operation of each species remains unchanged, but there are distinctive features that stand out from the general concept.

The main types of loans:

A bank loan is a classic option, which implies the issuance of money to the borrower for a pre—agreed period.
Commercial credit is the issuance of goods or the provision of services by one legal entity to another in installments.
A state loan implies that one of the parties is the state. It can both provide and receive funds. The second actor is another State, a commercial enterprise or an individual.

The state is considered a borrower, for example, when it issues bonds. By purchasing securities, a citizen or company becomes a creditor of the country. Often the issue helps to cope with the budget deficit. The bond has a certain nominal value and a fixed interest rate. The purchased securities after some time, which is indicated in the contract, are exchanged for the amount taking into account the original price + %.

The principle of standard lending is as follows:

An individual who needs borrowed funds submits an application and the necessary package of documents to a financial institution. In most cases, the client needs to come to one of the offices in person, but in recent years online lending has been actively developing when this item is carried out through the company’s website.
The organization checks the received application, analyzes the solvency of the borrower.
The Bank makes a positive or negative decision.
If the request is approved, an agreement is drawn up, which specifies: the amount, repayment period, payment schedule, interest rate, penalties and other conditions.
The requested amount is given to the Client.
When the debt is fully repaid, the financial institution provides a certificate of closure.

The main types of bank loans
To stimulate users’ interest in credit products, banks are constantly coming up with new “chips”, types of loans. Installment cards or virtual credit cards have been rapidly gaining popularity in recent years. However, the key types remain unchanged.

Consumer loans
The product implies the issuance of a loan for the purchase of certain goods or services. Often, you can use the banking service directly in the store where appliances, furniture, clothing, etc. are issued.

The main requirement is the age of majority. In most cases, a certificate of income is not needed. There are options with and without collateral. The maximum loan term rarely exceeds 5-6 years. The spread in interest rates depends on the bank, the terms of the loan, and ranges from 9 to 20%.

Credit cards
They occupy an honorable place in the classification of loans, because they are in great demand. The money lent by the bank is stored on a plastic card, with which you can pay for purchases and withdraw funds if necessary.

Most credit cards have a grace period during which you can dispose of money without interest. For example, the client is given 50 days of preferential use. If you return the funds spent during this period of time, then % will not be charged.

 

An additional plus is cashback (refund of part of the spent funds). Many banks, in order to attract new customers and retain old ones, develop various partner programs or discount systems, conduct promotions.

Car loans
From the concept it becomes clear that borrowed funds are issued for the purchase of a car. The product is targeted, so you can’t use the money otherwise. A loan can be obtained at the bank’s office or at a car dealership with which a financial institution has a partnership agreement.

The main advantage is lower interest rates than consumer loans. This is ensured by the collateral, which is the purchased car. The vehicle cannot be sold, exchanged, or donated. An important condition is the need for full CASCO or CTP insurance.

Mortgage loans
The principle is similar to a car loan, but the purchased real estate acts as collateral. Unlike the previous varieties, the loan term can reach several decades. Usually 20-30 years, depending on the cost of housing, the client’s income and other factors.

 

The average mortgage interest rate in 2019 in the Russian Federation ranges from 8 to 12% per year. The full cost of housing or part of it is paid with credit funds.

The main parameters of a bank loan
The key points are considered to be:

term of use of borrowed funds;
nominal rate in %;
repayment periodicity;
description of the pledge, if available;
loan repayment method;
the procedure for accrual and write-off of interest;
additional fees;
insurance conditions.
In addition to the main ones, there are secondary parameters: deferred payment conditions, penalties, early repayment, annuity payments.

The amount of the interest rate
The terms of accrual of % are prescribed in the contract. The Bank does not have the right to unilaterally adjust the indicator, unless it is provided for in the agreement. The amount of the additional payment is calculated based on the principal amount of the debt.

Commercial banks issue loans guided by the key rate of the Central Bank of the Russian Federation. Since June 17, 2019, it has been 7.5%. In order to benefit, increase this indicator when issuing a loan to a client. The higher the key rate, the higher interest rates on loans are offered by banking organizations.

Additional fees
Financial institutions may charge fees for the provision of certain services. Their list and size are necessarily prescribed in the loan agreement. Commissions are often set for the following services and operations:

cash withdrawal from a credit card;
prolongation of the contract;
early repayment;
disbursement of funds;
annual maintenance of a plastic card.
The ingenuity of banks is very great, so you need to carefully read the contract to know about all the pitfalls.
Related expenses
Additional costs will be incurred when buying a home with a mortgage. It is necessary to pay taxes, commission to the realtor, pay registration fees. The situation is similar with a car loan. In addition, you will need to buy full insurance.

Do not forget about commissions, penalties and other fees that the bank may have. So that the associated costs do not come as a surprise, you need to carefully study the loan agreement.
Pros and cons of a bank loan
Positive aspects:

it does not take a long time to save money to buy expensive goods and services (travel, real estate, car, higher education);
there is no need to borrow money from friends and relatives;
convenient and fast registration;
some banking offers have a loyalty program, cashback and other benefits.

Negative aspects:

high interest on the loan;
additional costs for commissions and insurance;
when a pledge is made, an encumbrance is imposed on the property;
in case of late payment, an arrest may be imposed through the court.
To determine whether to take a loan or not, you need to carefully study the terms, the contract and calculate the expediency of the action.

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