Types Of Bank Loans

deciding what type of loan you need can be a little overwhelming because bank loans come in many shapes and sizes. Here are different types of bank loans:

Fixed rate: Fixed rate loans are among the most common consumer loans. Fixedrate loans keep the same interest rate throughout the life of the loan. The interest rate on fixedrate loans may be slightly higher in most cases than a variable-rate loan.

Variable rate: Variablerate loans have interest rates that fluctuate depending on the market rate or “prime” rate. With a variable interest rate, the amount you pay on your loan can vary each month. Variable interest rates are usually lower than fixed rates.

Instalment: An instalment loan is one that is repaid in equal amounts over a certain period of time. Repayment periods for instalment loans can range from six months to 30 years. A home mortgage or auto loan can be considered a type of instalment loan. Instalment loans have very specific repayment terms, including a starting date, an ending date, and the amount of interest you will pay over the life of the loan.

 Secured: A secured loan is one backed up by collateral, such as a house or a car. A home equity loan is an example of a secured loan. In the event that the homeowner defaults on the loan, the bank has the right to take the house. The most common secured loans are home mortgages, home equity loans, auto loans, boat loans and business loans.

Unsecured: Unsecured loans require no collateral. These loans are usually offered to individuals with very good credit scores. The interest rates for unsecured loans are typically very high and usually correspond to a person’s credit score; the higher the credit rating, the better the interest rate. Examples of unsecured loans include bank credit cards or other personal lines of credit.

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