In the financial market there are many types of loans, with different characteristics. Knowing them in detail will help us select the one that best suits our needs or financial situation. Go for it!
1: Personal loans
Personal loans are those financial products that allow us to finance the acquisition of durable goods (for example, a car), pay for a master’s degree, take a trip or make a reform. This type of service is formalized through a contract that establishes the amount granted and the periodic fees that we will have to pay, which includes interest, commissions and expenses according to the agreed conditions.
In recent years, thanks to the advancement of Fintech technology, fast loans have been positioned as the best product for this type of financing. Among its advantages is speed (in a period of between 24 and 48 hours you can access the money requested), flexibility when applying for credit and security (in addition to being regulated by Law 16/2011 on consumer credit and act under the supervision of the regional authorities, fast credit institutions have an online technology that allows them to combat fraud and scam, as well as identity theft crimes).
2: Business loans
One of the most common situations in which companies need to apply for a loan is when they decide to make a significant investment in a good or service to improve productivity or boost business growth. In the current context, due to the economic crisis, companies have not had easy access to loans and credits from traditional financial entities. Fortunately, new legal figures and operations have emerged that allow obtaining the liquidity necessary for day-to-day life quickly and easily.
However, it must be borne in mind that when an entrepreneur faces the situation of applying for a business loan, he must provide documentation that justifies to the financial institution not only the need, but also the viability of this operation, in order to face your amortization. In this sense, the new financial entities that operate through the internet in an agile and efficient way allow the necessary steps to be taken online to receive the economic injection at the right time for the investment.
3: Freelance loans
The self-employed sector is, without a doubt, one of the most difficult to find when it comes to obtaining financing. In the case of traditional financial institutions, in addition to the usual documentation, the following documentation is usually requested:
Proforma invoices or budget of the investment to be made.
Tax declaration of the last three years, with annual summaries of VAT and personal income tax or companies.
Quarterly declaration to the Treasury of the current year and accounting situation at the time of the request.
Details of the financing operations that the applicant has with other financial entities.
Last payment to Social Security.
Proof of stable income.
Photocopy of the registration document as a freelance.
Length of service in the company and type of contract.
In addition, when applying for one of these self-employed loans, it is convenient to assess some aspects:
Consider contracting short-term loans, since they are very useful to deal with overdrafts at specific times when liquidity is needed.
Look for banking products specifically designed for the self-employed, since these respond better to the specific needs of this group.
Before applying for the loan, it is advisable to make an exhaustive business plan in which the payments to be made are taken into account. For this you can design an amortization table where the interest and the capital to be paid are broken down during the term of the loan.
4: Consumer loans
Consumer loans are all those financial operations designed to satisfy personal needs. It is, therefore, credits requested by a consumer who has the need to acquire goods or services for non-professional use: the purchase of furniture, the purchase of a household appliance, the need to cover the expenses of a wedding, a trip, etc.
Normally, this type of product is usually offered in the establishments where the good or service is purchased, it would be a kind of deferred payment. This makes it easier for the user to make the purchase, since they can contract the financing service at the same time, without having to carry out more procedures or travel. However, the consumer is carrying out the procedure directly with an entity, so the establishment, in reality, would be acting as a mere intermediary.
As in traditional loans, the term in which the debt will be amortized is normally stipulated in the contract, as well as the interest that the applicant must pay for its installment payment.
5: Student loans
Student loans are an increasingly common alternative for those who are interested in enhancing their professional development either by completing a master’s degree or by accessing specialization courses, doctorates or stays at foreign universities.
Normally, these types of loans are usually differentiated according to the purpose for which the funds are used:
1) Loan for scholarships: it is an advance to the student who has been awarded a scholarship to defray the expenses he has until he receives the money of said scholarship from the institution.
2) Tuition loan: This financial aid is intended to pay university fees. You can also include an amount to cover cats with school supplies, accommodation or child support.
3) Postgraduate loan: it is normally used in cases where you want to pursue a master’s or doctorate.
4) Loan for studies abroad: in this case the amount is used to cover the expenses of an Erasmus or other type of residence at a foreign university.
6: Mortgage loans
A mortgage loan is one whose purpose is to grant a certain amount of money that will go towards the purchase or restoration of real estate. This type of financing, in addition to involving amounts of money greater than personal loans, has a real guarantee for the financial institution. In the event that the client does not have the capacity to repay the money committed in the loan, the credit company can sell the mortgaged property to repay the debt or become the owner of the same. Thus, having an effective guarantee is one of the safest loan operations for the entity that grants it.
Due to the high amounts granted, the terms for their return are usually longer and the interest rate payable is shorter
The maximum amount granted by the financial institution is usually around 80% of the appraised value of the real estate and the fee to be paid is usually 35% of the net monthly income of the person requesting it.
As we have seen, a loan is a commitment that should not be taken lightly. To be able to face and get the most profitability, we must acquire a prior knowledge of the types of loans and their particular characteristics, as well as carry out a study of our financial capabilities to face debt within the established terms.