What is a Bank Loan?
Banking entities provide their customers with various financial operations, such as money deposits and currency purchases, but among these different services offered by Bank loans are one of the most requested.
A bank loan is given when a bank contributes a certain amount of money lent to a customer requesting the service.
However, there are many doubts regarding this type of operation, such as What advantages does it offer? What types of loans are there? o How cánido I apply for a bank loan? In this article you will find the answers to these important questions.
How do bank loans work?
Bank loans consist of credits granted by a bank to a person or company.
The person interested in the loan or Borrower must submit an application to the bankafter receiving it, said entity will carefully analyze the borrower’s ability to pay, to finally approve the loan.
It is important to remember that the bank will deliver the desired amount under certain conditions, since the bank’s profit consists in receiving a small commissionThis means that the borrower must deliver an additional amount when returning the money.
We will illustrate what has been said with an example:
If a person asks the bank for a loan of $40,000, at an interest rate of 5%, he will have to repay the bank $42,000.
That is, the bank will have earned $2,000 at the end of the operation.
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Main characteristics of Bank Loans
Bank loans help to solve a situation that requires a certain amount of money.
But the borrower must pay interest on the loan.
Therefore, it is recommended to be prudent when requesting this type of operation.
These are the main features What we should know when handling loans:
- Capital or primordial amount: It is the amount of money borrowed.
Interest will be paid on it.
Said interest will be based on the duration of the loan and the risk of the purchaser of the same.
- Interest: It is the cost of the loan, that is, the charge charged for the use of money or bank capital during a certain time.
It is usually represented in percentage.
- Share: Refers to each of the money back payments.
This covers both the primordial amount and the interest.
- Term: It is the time during which the loan will be used.
This will start from when the contract begins until the payment of the last installment, that is, until the entire loan and its interest are repaid.
- Lender: It is the agent in charge of lending the money, to which the interest must be returned along with the loan.
In the case of bank loans, the bank fulfills the role of lender.
- Borrower: Natural or legal person who receives the amount or capital and who must return it in accordance with what was agreed with the lender.
3 Advantages of a bank loan
Some people doubt the effectiveness of bank loans to cover a financial need.
But the reality is that if you use this type of service responsibly and prudently, you will enjoy many advantages, including the following:
- Flexibility. Generally, with bank loans, you only have to worry about paying the installments on time.
In addition, the bank is not in charge of supervising how the borrower emplees the borrowed amount.
- profitable.
Believe it or not, bank loans perro be very profitable.
Because, in terms of interest, they are usually the cheapest option.
- Fiscal benefits. When a bank loan is requested for business reasons, the interest paid by the borrower is a tax-deductible expense.
Types of bank loans
There are a wide variety of reasons that perro motivate someone to request a loan from the bank.
Given that each one is of a different nature, different types of bank loans cánido be taken advantage of.
Among them the following:
- Personal loans.
It is a loan that covers specific money needs.
Generally, they tend to be for small amounts, such as for a trip, paying for a wedding, among others.
Your repayment time is short-term, as it is in tune with the small amount borrowed.
- consumer loans.
This type of bank loan is usually used to finance durable goods or services, such as a car or an appliance.
The amount requested must be returned in a short space of time.
- student loans.
This is probably the least known type of bank loan.
As their name indicates, they are loans designed to finance needs related to academic studies, such as: courses, scholarships, study fees, among others.
- Mortgage loans.
This loan is guaranteed by real estate, and is called a mortgage.
In this type of loan, the bank has a guarantee of the return of the funds for a period of time.
The mortgage serves to ensure the right of legal claim against the borrower’s house if he fails to comply with the agreed terms.
How to know what type of bank loan is best for me?
The request of the ideal loan will depend on the need that you must cover.
Some people want to spend a few days on vacation, cover a medical emergency or carry out a job that will not require a large amount of money, in this case it is useful to request a personal loan, since it provides you with a relatively small amount with a repayment time short term.
Now, if you need a loan to remodel your house, buy a car or pay for a very expensive good or service.
Your ideal loan option is consumer loans.
In reality, the type of loans you request will depend on the value of what you want to pay or buy.
Bank loan What account is it?
When a client acquires a bank loan, he also acquires a debt.
This fact leads to posting and recording the loan received in the liabilities area and therefore the account to which the bank loans belong is to the liability account.
When a bank loan is requested, the borrower is obliged to pay the primordial amount and interest to the bank.
Sometimes these types of operations cánido be a bit difficult to handle, so you should maintain good debt payment management.
How to apply for a bank loan?
When going to a bank to request a loan, we must know the amount of money we really need and if we have the capacity to pay said loan, since the entity takes these into account. 2 factors to grant the loan.
It is important that you evaluate whether you have a regular source of income sufficient to pay the monthly installments of the loan.
The bank takes into account our history as a customer and payer when granting this service.
If you have always been responsible with the management of your account, the bank will trust you more.
It is also important not to be included in a list of defaulters.
In addition, from this the banks make sure that you comply with the following requirements:
- The applicant must be of legal age.
- Valid identity document.
- Explanatory letter of your request that includes the amount of money you need.
- Demonstrate solvency.
- Proof of income.
- Loan repayment guarantee (Housing deed, car documents, etcétera.)
These are some of the documents that the bank from which you wish to apply for the loan perro request you.
These may vary from one entity to another.Therefore, it is essential to ask your bank directly about the requirements for loans.
It is possible that during the verification of the same request other additional documents.
During the grant process You must agree with the bank the repayment time, interest and monthly fee.
Once the loan is approved, the bank will deposit the requested amount in your bank account, so that you perro have the money.
From that moment you must begin to return it along with the primordial amount, the established interest.
❯❯❯ In the following linked article, you cánido see some sites for request a personal loan totally en línea and without very extensive paperwork.
We hope you liked our article What is a Bank Loan?
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