Types of Loans, what are their characteristics

 

A bank loan is the operation through which the financial institution makes available to the client a certain amount of money, previously stipulated, through a contract with which said client acquires the obligation to return the money in a limited time. Usually, interest is added to the amount of money lent by the bank, which must also be repaid, and which will vary depending on the type of loan requested.

 

Requesting a personal credit or bank loan , therefore, is a commitment that should not be taken lightly and that in order to get the best profitability requires prior knowledge of its characteristics. Knowing what types of loans exist is essential to be able to request from our financial institution the one that best suits our needs.

 

What different elements make up a loan?

 

Before differentiating the types of loans that exist, it is important to know the elements that form them to avoid misunderstandings and confusion when requesting them.

 

Capital : amount of money requested from the bank.

Interest : price that the client pays to the entity for disposing of the borrowed capital.

Term : period of time stipulated in the contract to repay the principal plus interest.

 

Types of loans

Although there are different types of loans, in reality they all can be included within two broad categories known as personal loans and mortgage loans .

 

Personal loans are those intended to finance specific customer needs at a given time. As a general rule, the principal or financial amount requested in this type of loan is small. Among the personal loans are, for example, the so-called consumer loans or online credit , quick loans and study loans. Those for consumption are used to finance consumer goods of a durable nature such as a car, for example. Quick loans, also called "immediate loans", are those that seek to be agile in responding to a loan request. While the study ones, as the name suggests, are designed to cover the tuition fees for degrees, postgraduates and even university trips such as Erasmus.

 

The BBVA loan simulator allows you to see the different types of personal loans offered by the bank. Access and simulate your loan, whether or not you are a customer, and check its conditions depending on the amount of money you would like to request.

 

And if what you have are doubts regarding the amount that you could request at BBVA, or if you need us to help you request a loan in the most personalized and responsible way, we present you the new BBVA digital loan experience, Discover your Limit , the which will allow you to know what amount we can grant you at BBVA, according to the data you provide us. To do this, you only have to enter your information and we will respond to you in a maximum of 8 working hours, indicating the maximum amount of your loan. Then you decide if you want to hire him or not.

 

Mortgage loans, for their part, are those intended to  finance the purchase of a home  and, on occasions, the start-up of a business. In addition to involving amounts of money greater than those of personal loans, the different types of mortgage loans have a real guarantee for the bank. In other words, if the client does not repay the loan money, the bank can sell the mortgaged property to repay the debt, and they can also become the owner of the financed home.

 

In addition to the two types mentioned, the loans are also differentiated depending on whether they have  a guarantee  or not. Having a guarantee when applying for a loan is a way of guaranteeing compliance with the economic obligations acquired. The guarantor declares himself willing to meet the commitments of the guaranteed, that is, to pay the capital loaned plus interest in the event that the borrower cannot. However, to be a guarantor, a series of characteristics must be met, among others:

 

Being of legal age : this requirement may not be met in some very specific and exceptional cases.

Have solvency : the guarantor must have an income greater than the obligations acquired with the bank by the applicant for the loan.

Stable income : in addition to being solvent, the person who guarantees must have guaranteed income as much as possible.

Have properties free of charge : this requirement is especially important in the case of mortgage loans, since the guarantor could cover the conditions of the loan with his own home.

Having a guarantee is always a sign of confidence that greatly increases the chances that the bank will approve the requested loan, whatever the type. It should also be remembered that if the holder does not pay the loan, the guarantor must pay the debt with his present and future assets.

 

How the repayment of a loan works

 

The loan amortization table  is the table that represents how our debt evolves over time. In the financial sector there are different ways to amortize (return) the money that a bank lends to its customers, although in Spain the most common is the French method, which consists of the customer always paying the same monthly fee throughout their lives. of the loan.

 

In any case, that monthly payment will always be made up of two elements: the capital that they have lent us, and that we are returning, and the interest that we pay on that money. Therefore, and thanks to the amortization table, we can see how that debt evolves month by month.