Types of credit: Classification of loans

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There are many types of credits on the market, which is why it is necessary for you to be informed, so that when taking out a loan you can select the most suitable one for you. What is a credit? Taking into account the definition of Asobancaria, a credit is “a loan of money that a financial institution grants, […]

 

 

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There are many types of loans on the market, which is why it is necessary for you to be informed, so that when you take out a loan you can select the most suitable one for you.

 

What is a credit?

 

Taking into account the definition of  Asobancaria,  a credit is “ a loan of money that a financial institution grants you, with the commitment that in the future you will return these resources , together with an interest rate, either through installments or in a single payment.”

 

Types of credits

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The classification when we talk about this topic is very varied, since it is possible to identify the types of credits by their origin, use, payment time and guarantees. Below we will define them so that you can more easily recognize the loan you need.

  • According to the payment term

This differentiation occurs in relation to the time in which the total payment of the debt can be made:

  1. Short-term loans: these are loans in which you must pay off the debt within a maximum period of one year. These loans usually have a lower interest rate.
  2. Medium-term loans: these types of credit are usually granted with payment installments of more than 12 months, usually up to four or five years. In general, suppliers of raw materials for production and consumption can access this credit.
  3. Long-term loans:   the repayment period for this type of loan is several years, which means that the interest rates are higher. They are generally granted for the purchase of homes, real estate, equipment, machinery, among others.
  • According to the origin
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This classification is established according to the institution that grants the credit:

  1. Bank credit: as its name indicates, it is granted by a bank. It is the most common type of credit and also allows you to buy goods and services in the short and long term.
  1. Commercial credits: These types of credits refer to those in which a supplier of products or services provides a client with a loan whose main purpose is the production and distribution of goods.
  • According to destiny
  1. Production credit: applied in different economic activities, industries and businesses.
  2. Consumer credit : is a loan that a financial institution grants to a person to acquire goods or services. It normally refers to common purchases such as a vehicle, furniture or other types of expenses such as travel, education, unforeseen events, among others.
  3. Mortgage loan : is a medium or long-term loan granted for the purchase, expansion or construction of a home. It is also used to obtain sites, offices, commercial premises or for projects that the applicant wishes to initiate.
  4. Auto loan : is a loan made by various financial entities with the sole purpose of acquiring a vehicle, whether new or used.
  5. Microcredit and SMEs: used to finance productive activities of small and medium-sized enterprises.
  • According to the warranty
  1. Personal: This is a loan that is given to a natural person, and is made in the short and medium term. Often, only the signature of the person who is acquiring the loan and that of his or her coder are required. In order for the loan to be granted, it is necessary to review the personal and commercial background of the person requesting the loan.
  2. Real or pledged: it is a bank loan to a person to purchase goods. When approved, the object will remain as a pledge until the debt is fully paid off.
  3. Mortgage: It is similar to collateral, the difference is that the mortgage is always made on a property, real estate.

We hope that the difference between the different types of loans is now clear to you. We hope that you make the best decision when applying for one.

In our  comparator  you can always find the best options.

Get informed, compare and choose!

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