Types of loans. The guide to know them ALL

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Often, especially when it comes to the creation of new companies, we tend to resort to the search for financing through more traditional methods: bank financing. However, in the financial market, there is a multitude of types of loans that many of us probably have not heard of until now. Throughout this post, we tell you each and every one of them.

 

Definition of loan

When we talk about loans we refer to the action of lending or giving another person a specific amount of money or a specific good- get deal. All this for a period of time (called term) previously stipulated by the loan contract and by which the figures of lender and borrower are established. In this type of financial operations, the second will be forced to return the loaned to the first in exchange for an interest rate also fixed. It is important to say here that we should not be confused with online credits since they are a totally different financial product.

 

Types of loans

Types of loans

As we can imagine, the types of loans are many and varied, since there may be a large number of characteristics or types … Thus, the criteria for classifying loan operations will be several:

Types of loans according to destination

That is if the loans are intended for one or another thing. Here we can find consumptive loans – loans dedicated to consumption – and productive loans, dedicated to the production of goods and services. These, in turn, can be divided into:

  • loans derived to the operation or current.
  • investment loans (destined to the investment of fixed assets).

Types of loans according to the guarantee

If it is loans with a personal guarantee or on the contrary, they do not have it. We see here:

  • Loans with a personal guarantee (not to be confused with loans or personal loans), which are granted solely based on the creditworthiness of the borrower or a third party with the role of guarantor.
  • Loans with a real guarantee: A certain asset (whether movable or immovable) is established as a guarantee. Within it, we find loans with mortgage collateral and loans with collateral security (whereas collateral and payment support, a piece of furniture given in pledge is established).

Types of loans according to the term of maturity

This is one of the most well-known criteria for all of us and we pay more attention when classifying a loan. The loans that we can find within it are:

  1. Short term (loans that do not exceed the year).
  2. Medium term (loans whose amortization is between twelve and three years).
  3. Long-term (maturity term exceeding three years).

Types of loans according to the interest rate

There are two types of loans according to this criterion:

  • loans with a fixed interest rate: during the whole life of the operation
  • variable interest loans: in which the interest rate may be different from the initial.

In any case, this is a fundamental criterion to which we must attend at the time of signing the commercial loan contract since depending on this the cost of financing will vary greatly.

Types of loans according to the beneficiary

We can meet with:

  • Private loans: granted to individuals by private individuals and legal entities
  • public loans: those granted by public institutions This type of loans tend to have a very low-interest rate since, on many occasions, these loans are propelled by aid schemes for certain groups or sectors.

Types of loans according to the lender

According to the lender we find:

  • loans with a single lender: in which the individual or legal entity that lends their money is only one
  • Syndicated loans: where the amount requested is granted by several financial institutions

Types of loans according to the form of instrumentation

Here there are three types of loans:

  1. Loans in mercantile policy: those that need to be documented in mercantile policy intervened by Corredor de Comercio.
  2. Loans in financial effects: unlike in the previous case, they are documented in bills of exchange where the lender accepts the bill of exchange for the amount of the credit owed.
  3. Public deed loans: they are usually the most common. They are authorized by a notary, especially when mortgage guarantees are required.

Types of loans according to the amortization system

It is the last of the criteria, and within it, we find four types:

  1. A loan with interest settlement and the return of capital at maturity.
  2. Loan for constant installments: it is usually the most common and in each installment the amounts composed of capital and interest accrued up to the moment are paid.
  3. Loans for constant capital installments but with the settlement of interest payable after each period on the outstanding capital.
  4. Loans for increasing installments (principal and interest).

As in the interest rate, it is important to pay attention to the clauses relating to this criterion when signing the loan contract.

 

Types of loans: infographics

 

Other types of loans

Other types of loans

In addition to all the loans that we have already named, there are many others that we will name below and of which we will give a few small brushstrokes.

Mortgage loan

It is a banking product – a loan – that allows the borrower (a client who receives the amount) to receive a certain amount of money from a credit institution, thereby assuming certain payment obligations among others. This type of loans has intrinsic a personal guarantee of payment (the obligation that as a borrower is obtained) and a real guarantee consisting of the mortgage of a real estate, which implies that if the client does not return the stipulated amount to the bank, it can stay with the home subject to mortgage thus becoming the owner of it.

What kind of interest do they have? In this case, the interest rate is much lower than that of loans of cash, for example, and it is important to remember that the loan requested may never exceed 80% of the value of the home used as collateral, so in many cases it will be necessary to complement it with another type of financing such as non-bank loans.

Participatory loan

It is a financial instrument consisting of the granting of a loan agreed with a financial institution in which other entities participate at the same time. It is, therefore, an intermediate financial instrument between the social capital to which any company can resort and the financial liability. This type of loan is used by companies at certain times to favor their financial structure as it is a hybrid between a traditional loan and venture capital investments.

How does it work? Financial entities are granting financing to the applicant companies as they achieve certain objectives set in the business plan.

What kind of interest do you have? It is a long-term loan that may even have the possibility of a shortage (depending on the achievement or not of business milestones). The interest rate of this loan is usually mixed since they usually have a fixed part and a variable interest part (which will depend on the indicators of the economic sector to which they belong).

One of the peculiarities of this type of financing of companies is that at the time of signing the contract can stipulate a final date in which the financial institution with which the loan is contracted, can convert the loan into a percentage of the company -actions of the company-.

These loans are granted to companies that have an innovative character, so being beneficiaries of this type of loans can improve the image of the company.

Inter-company loan

These are loans or credits in which a professional (employer) lends to another a certain amount of money in the normal development of their work activity. This type of loans is therefore linked to loans of circulating necessary for the correct development of the daily tasks of the company. The interest rate for this type of financing is generally, in general terms, less expensive than in the case of bank financing since the figure of a lender is acquired by an individual.

Loans through Crowdlending

Also known as loans between individuals or P2P loans. It is, as its name suggests, a type of non-bank loan – it does not require banking intervention – in the companies (or individuals) receive funding funded through private investors who trust their project in exchange for a certain type of interest/profitability. All this process is managed through Crowdlending’s online investment platforms.

Interest on Crowdlending loans is much lower than other project financing alternatives.

And you? Why type of loan do you opt for? Do not think twice and apply for your loan through Crowdlending!