Forms of loans

Not every loan offered by banks is suitable for any and every purpose.

Not every loan offered by banks is suitable for any and every purpose.

There are very different forms of credit. Some of them are discussed in more detail in our articles because they are either the most common or the most unusual and relatively new to the market, such as the short-term loan, which makes it flexible for 30 days.

Why choose the right loan?

Why choose the right loan?

The different forms of credit offer different options to borrowers. For example, the discretionary credit is a frequently used credit line that banks assign together with the management of the current account. Nevertheless, many consumers who constantly use their disposition, not at all familiar, that it is a loan they take there and also very expensive. The disposition is not suitable for livelihood, it is not a second income and it is not suitable to finance purchases for which larger sums are necessary. The disposition makes financial flexibility and can be used whenever the customer is able to balance his current account within three months.

If the checking account is already hopelessly overdrawn and not in the least to think about compensation, an installment loan is needed with which the account can be compensated. Installment loans have the advantage that they are offered at different fixed-interest maturities so that consumers can plan in advance how much rate they can afford and want. The installment loan is a common loan to make all kinds of purchases.

The situation is different with credit on loans. Framework loans have neither fixed interest rates nor fixed terms. They are usually granted indefinitely and are suitable for spontaneously increasing flexibility and liquidity. Popular credit lines are the collection and call-off loans and the credit that banks grant in connection with the issuing of credit cards. These framework loans are now also available as revolving loans, which, apart from a minimum repayment, are attributed to rates determined by the borrower himself.

Much less well-known, but worth mentioning is the securities loan, which does not have to be used for the purchase of shares and securities, as the name implies, but instead offers security holders the opportunity to gain additional liquidity. Securities loans, however, carry a certain risk, which is associated with the value of the securities account. The security loan is only conditionally suitable for acquisitions or other expenses.

It should not go unmentioned at this point the far less well-known policy loan. The policy loan is a loan in which the borrower lends only his own money from life insurance. Many insured people still do not know that this possibility exists. It is not necessarily necessary to terminate the life insurance in case of financial bottlenecks in order to obtain liquidity. The insured is much better off when he takes out a policy loan. The insurance protection remains in full and the credit rating plays no role in the policy loan. In addition, you do not actually owe a debt.

Mortgage lending is a form of credit that is important when it comes to fulfilling the dream of your own home. In general, the purchase of a property or the construction of a house without appropriate mortgage lending is not possible. Mortgage lending is available in other sizes and with terms other than consumer credit. A popular form here are the annuity loans.

Something new on the market is the offers for short-term credit. Here are microcredits with a maximum term of 30 days. In Germany, short-term loans are relatively new but enjoy brisk demand from consumers. These types of loans are intended to bridge very short-term financial bottlenecks, for example, when the operational back-up payment is due or an unexpected car repair is beyond the financial scope of the checking account.

Pick the right loan for every purpose

Pick the right loan for every purpose

In addition to the forms of credit, which we describe in more detail in our contributions, there are of course many other variants of loans. The largest part is covered by the description of installment loans. Other loans, such as final installment financing, are special loans that are typically offered by auto banks in connection with the financing of vehicles. They are characterized by the fact that during the term relatively low rates are to be paid because at the end a closing rate stands.

Consumers should always be aware in advance of which type of loan is best suited to their particular circumstances and to better understand the main differences in the forms of credit in general. Even so, you can avoid over-indebtedness and save a lot of money on unnecessary interest or debt restructuring.

The most famous loans:

  • Construction Financing
  • credit Facility
  • Short-term credit
  • policy loans
  • credit line
  • installment loan
  • Securities lending