As individual as the different borrowers, the abundance of available loans in the market presents itself. The type of loan determines the form of repayment, the purpose and the loan. It is important to distinguish between personal loans and commercial loans and to assume different conditions.
The importance of collateral
When taking out a loan, the borrower is required to provide collateral. These collateral serves to provide security to the lender, such as a bank, in return for the loan. Without collateral, loans are generally not granted. The word security does not refer exclusively to material assets. The collateral can be determined in different ways, depending on the type of loan and the loan agreement.
What is the significance of collateral when choosing the type of loan?
The type of security for a loan depends mainly on the type of loan. In an installment loan, the salary is usually used as collateral for the loan. There is a simple reason for this: a installment loan is given without any purpose. That is, the award of the loan is not tied to a specific purpose, such as the purchase of a car.
With a real estate loan, the property to be purchased is taken as collateral. The land register entry is considered as security for the real estate loan. Since such a loan is directly linked to the purpose of buying a property, the property to be purchased may be considered as collateral.
There are two options for a car loan. There are banks that accept the car letter as collateral. For other banks, the assignment of salary is agreed as collateral for car financing. In the case of an overdraft, the salary usually also counts as security. For the choice of the security of a dispatching loan is crucial what was agreed in the contract on the current account and the Dispo.
Personal loans: models
In the area of loans for private customers there are different types of loans. These differ in part significantly. The following is an overview of the different models of personal loans.
Overdrafts are often referred to as disbursements. An overdraft creditor serves as the holder of a checking account to be financially liquid even if there is no more money left in the account. This makes it possible to bridge the time until the next salary payment. Bills out of line, such as electricity back payments, can be transferred directly. Overdrafts are short-term loans. This is reflected in the fact that there is no fixed loan agreement with maturity and fixed loan installments. The borrower can use the overdraft facility as provided by the bank. The interest is paid only for the loan amount that was actually used.
Overdrafts have the following disadvantages: If a bank account is frequently overdrawn, compounding costs are immense. An overdraft is therefore just a short-term loan that should be repaid quickly. If this is not possible, a installment loan for rescheduling the emergency loan is recommended. Here, the legislator has made provisions so that bank customers do not burden their checking account over years with an overdraft.
A installment loan is often raised when a specific amount for a specific purpose is to be included. These may be open invoices or installment credit for the next vacation. Installment loans are not earmarked. When borrowing, the bank does not need to specify a purpose. This has the advantage that the borrower can freely dispose of the money. While the overdraft as a disadvantage has the high costs, the interest rates for a installment loan with a correspondingly good credit rating are in a low range.
Bauspar was used more than once again several years ago. The interest was advantageous, the investment was worthwhile. After the savings phase and the resting phase, building society savers also received a favorable home savings loan. A building loan is hardly worthwhile anymore. The interest rates are currently very low and real estate loans are often cheaper for third parties, without being bound for years to a home savings contract.
Real estate loans
Real estate loans are accepted for the purchase or construction of a house. Such real estate loans are designed for the long term and are tied directly to the property concerned. Of advantage are the low interest rates, as the property is used as collateral for the loan at the same time. Depending on the real estate loan, a different fixed interest rate may be chosen. Real estate loans without fixed interest rates and with a variable interest rate up to a fixed interest rate of 40 years are possible. The lower the interest rates are currently, the longer the interest rate commitment should be. A variable interest rate is the cheapest for a real estate loan, but not recommended.
Commercial Loans: Models
As with personal loans, there are also various forms of credit for commercial loans. The most important business credit types are explained below.
Investment loans are loans that companies and companies raise in the medium to long term. Among other things, this type of credit serves to enable the purchase of vehicle fleets, operating halls and machines. The purchase of such assets is financed through investment loans. The advantage of such a loan is that the company does not have to take equity for the purchase and thus remain liquid.
A bank overdraft is what a company’s credit line is to a private customer. The current account credit is granted up to a specified amount and can be used as required up to this amount. This has the advantage that the company also has funds available, for example, when waiting for payments from customers. The disadvantage of such overdrafts are the often high interest rates.
While investment loans are invested over the medium to long term, working capital loans are a short-term credit facility. A working capital loan is used by the company to purchase equipment such as computers, office supplies and materials for further processing. Often, working capital is financed through overdraft facilities, as it is easier for companies to settle the loan.
A cession loan is a hedge of existing loans of a company. That is, in return for funding, the operation relinquishes its open claims it has to customers to the lending bank. This is convenient, but should be well considered. Not every customer wants to know his claims with third parties. Therefore, the cession loan is rarely used in domestic trade, but it is often used in foreign trade.
A guarantee loan is a special feature among commercial loans. In the case of guarantee loans, a bank gives a guarantee for a company to get a loan from another side. Such loans are usually only taken by large companies. The bank acts as a guarantor for the guarantee credit and is liable if the company does not repay the loan on time.
Factoring has been gaining in popularity for several years. Even smaller companies and self-employed people now use the possibility of assigning bills to a factoring company. The peculiarity: The receivables are not sold until the payment period has expired, but can be transferred directly to the company, which take over the factoring. The advantage for the operation: Depending on the agreement in the factoring contract, the bill is transferred to a large extent directly to the issuing company. Thus, the operation quickly becomes liquid again and does not have to borrow for a pre-financing or interim financing of new orders.