Through the loan agreement, the bank undertakes to make available to the borrower for the period of time specified in the agreement the amount of cash intended for a specified purpose, and the borrower undertakes to use it under the conditions specified in the agreement, return the amount of the loan used together with interest on the specified repayment dates and payment of commission on the loan granted (Article 69 (1) of the Banking Act of 29 August 1997).
When there is a shortage of funds in our home budget, or any unexpected expenses arise, we do not borrow from family or friends, but we decide on a loan. The financial products market, also thanks to huge interest, has developed and functions at a high level, offering various types of loans.
Pursuant to the statutory definition of a loan, cash must be used for the purpose indicated in the loan agreement. Therefore, we often distinguish types of loans based on their purpose. Another very popular division is the distinction based on the loan period or the type of collateral. Today, however, we will focus primarily on those loans that are most popular among consumers.
Types of bank loans for individuals – most often chosen
A cash loan
The cash loan is intended to meet the current needs of the borrower. This is a product addressed only to natural persons.
It is also the only type of loan whose purpose is not predetermined by a loan agreement. This means that the borrower can freely use the money obtained in the form of a cash loan and is in no way obliged to inform the bank about it. Moreover, the bank also has no right to check what the borrower has spent the funds borrowed from him. In the case of this loan, we can use the money for any purpose. We can reach for a cash loan if you want to buy a TV or a car, renovate an apartment or buy new furniture, or even cover current bills. Everything depends only on us and on the amount of capital of the loan obtained.
Practice shows that these are mainly low loans, the amount of which amounts to several to several thousand zlotys. The cash loan repayment period is then from a few to several months. Due to the low amounts and relatively short loan period, only the borrower’s income is the collateral. However, if we apply for a cash loan of up to several hundred thousand zlotys, the borrower’s income may not be sufficient and the bank will ask for other collateral, e.g. additional insurance, collateral on the item or surety.
As the name suggests, we must allocate the funds borrowed in this form to the purchase of a car or other vehicles acceptable in the assessment of the bank. Of course, we don’t always buy a car straight from the salon. Therefore, we can finance the purchase of a new or used car with a car loan. In this case, therefore, the capital credited by the bank may differ significantly. Therefore, the required form of collateral may be different for each borrower, from collateral only in the form of income, through registered pledge or assignment as collateral.
More and more people after high school continue their education. However, not everyone is lucky that they do not have to worry about money for studies, which most often, in connection with moving to another city, are necessary. Therefore, more and more young people are reaching for student loans, which is a very good way to cover the cost of living during their studies. This is a good option, also because the cost of interest on student loans is regulated by the state and is much lower than other loans. Due to the fact that the borrower is usually an unemployed person, a second person (guarantor) will be needed, whose income will be a collateral for the student loan. It can be, for example, a parent, working siblings or even an unrelated person who decides to vouch for our loan. The student loan is granted for the period of study (maximum 6 years, in the case of continuing doctoral studies, it can be additionally extended by a maximum of 4 years) and paid in monthly installments during the academic year (for 9 months – from October to June). Throughout the entire period of study, we also do not have to worry about repayment, because it does not start until 2 years after graduation. So we have time to calmly find a job and consolidate our material situation.
A revolving loan is another popular name for this financing method. To apply for such additional funding, we must be bank account holders. In practice, it looks like we can use funds that are larger than the status of our account. The credit limit is set and is as much as the indicated agreement. How does the loan repayment look like? Any inflow to a bank account reduces our debt, and this amount is again at our disposal.
This solution is gaining popularity practically overnight. All this in connection with the increasingly frequent requirement of having a credit card to make reservations, fees, purchase tickets and even purchase in stores, etc. A credit card, like an overdraft facility, operates on the basis of a credit limit.
This term will be called loans, which are granted at points of sale when buying electronics, household appliances, etc. Our loan is secured by our earnings.
The types of loans we use most often also include mortgages. It is no secret that every adult and working person, sooner or later decides to buy their four corners.
A mortgage is often used in terms interchangeable with a home loan. Even the banks themselves often do not distinguish them in their offer as separate products. A mortgage is simply defined by any mortgage-backed loan.
What is worth knowing about? A residential mortgage is not only for buying a dwelling, but can also be used to buy or build a single-family house or to buy a construction plot. In turn, a mortgage, not intended for housing purposes, can also be used for renovation, purchase of premises for rent, a commercial building or agricultural plot.
Due to the high amounts of mortgage loans, the collateral significantly differs from the one used for cash, car or installment loans. In this case, it will be own contribution, which is a minimum of 10% of the value of the property and the establishment of a mortgage on the property. Most often, banks make the granting of a mortgage subject also to the additional insurance of real estate.
A consolidation loan
If we list types of bank loans based on their popularity, we cannot ignore the consolidation loan. Due to the increasing debt, and thus more frequent repayment problems, for many this is the only right solution to financial problems. A consolidation loan allows us to combine all our liabilities into one loan. Thanks to the extension of the loan period, we also have the option of significantly reducing the monthly installment and making it easier to pay off debts.
In practice, it looks like the capital obtained in the form of a consolidation loan, we repay our current debt. In this way, we do not have several different liabilities to pay, but one, adapted to our current financial capabilities, loan installment after consolidation. To put it even more explicitly, along with the decision granting consolidation we are getting rid of the current debt.
Until recently, only bank loans were subject to consolidation. Today, due to the changing needs of borrowers, we can also consolidate non-bank loans and even payday loans. However, it is worth remembering that the numerous delays and negative entries in the debtors’ databases practically bar our chance for consolidation in the bank. Therefore, if only our debt and the amount of monthly installments is problematic for us, then it is worth considering a consolidation loan to facilitate repayment, and at the same time take care of your creditworthiness, which may once again play a key role in our contacts with banks.
The most popular types of bank loans for enterprises
The obvious is also the fact that loans are not just for meeting the needs of private individuals. Many companies and businesses also benefit from the financial support that loans give them. When listing the types of bank loans, we cannot ignore those that finance businesses.
The working capital loan is intended to finance the company’s current operations. Therefore, it serves only companies already operating on the market. What’s more, it can only be used to finance the current expenses of the company, which is why we will not finance past due obligations whose maturity date has expired. The types of working capital loans are based on the method of withdrawing funds and they are:
– overdraft facility,
– and a loan in a credit account.
An investment loan is another useful option for raising funds for companies. The investment loan is granted to finance the investment. The loan period is much longer than in the case of a working capital loan, also because the funds credited are much higher. In this case, the items of the investment are often collateral. Of course, this is not all types of credit. However, it is precisely these types of loans and queries at banks that appear most frequently.