What types of loans exist in the market?

Not all loans are the same. In the market there are a lot of different types of loans, each aimed at a consumer profile. Do you want to go around the subject to know what financing options you have?

We could classify the loans according to their destination, the guarantee, the maturity period, the interest rate or the form of instrumentation, among a dozen rankings… But in reality all can be included in two broad categories: personal loans and mortgage loans.

Types of loans: personal loans

Personal loans are those that are requested to finance a specific need at a certain time. For example, the purchase of a vehicle, a reform of the home, a wedding, a breakdown or any other unexpected situation. The common denominator is to finance a specific need at a time when sufficient liquidity is not available to cover this expense with savings.

Within personal loans there are two main types: consumer loans and student loans. In the first case, consumer goods that usually have a lasting character are financed. The most frequent is the car, although consumer loans are also granted to buy furniture for the home, appliances or similar.

As for student loans, they are usually special loans aimed at the group of students so that they can start their university studies, pay for a master’s degree or finish the degree in a foreign country. They are very personalized loans that some young people use when they do not have scholarships or grants to study.

As a general rule, the amount of money requested in a personal loan is not high. The return period is also usually small, of eight years maximum. The return guarantee is personal (sometimes a guarantee is requested, although it is not usual) and the procedures to obtain it are not excessive.

Types of loans: mortgage loans

The second major category of loans is made up of mortgage loans, which are loans to finance the purchase of a home, although sometimes they are also used to start up a business.

The main difference with personal loans is that the guarantee is not only personal, but also real. This means that the property acts as a guarantee of payment, so in the event that you can not pay the debt, the house will become the bank.

The amount of mortgage loans is considerably greater than that of personal loans. As is logical, the return period is also longer. Many banks grant mortgages to repay up to 40 years. 40 years! Who knows how he will be in 40 years? It’s crazy.

While in the case of personal loans the interest rate is always fixed, with mortgage loans there are more alternatives: fixed rate (always the same interest rate), variable rate or mixed type (the first years the type is fixed and the following variable).

Are you still having doubts?