Credits

How can I know what credit to ask for? What are the types of credit? How many credits there are? In this article, we will tell you what the types of credit are. With that, we will also discuss each of them according to their importance in the market. Therefore, depending on your needs, you can choose which one you think is the most convenient for your situation.

Before that, we will also explain a little about the loan. Additionally, we will also add at the end the criteria to follow for preferring one loan over another. However, the best mortgage lenders in ohio can clarify you with the loan and type of credits and your calculations too if you can’t get out of confusion by just reading this.

What Is Credit?

As we have well explained in some other post, a loan is a financial operation through which a person or normally entity transfers an amount of money to another, in exchange for the latter returning it, along with the interest generated and accrued, under the terms and conditions established by the loan.

In this way, the one who gives up their money is called the creditor, and the one who must return it is called the debtor.

Credits Categorization

As we mentioned, there are many types of credits, depending mainly on three variables: term, destination, and guarantee. Bank credit is normally granted by a credit institution, typically banks, through the conclusion of a contract. It is necessary to differentiate it from loans. While in credit, the bank grants you an amount of money, and you can have it or not, paying only the corresponding interest on the part you use, in the loan, you pay interest for the entire amount of money they lend you, whether you use the money or not.

Next, we present the characteristics of the types of credits that exist:

Mortgage Credits

It is the credit par excellence. It is the credit granted by a financial institution for property acquisition. This property can already be built, and open space houses, offices, and other property construction. With the guarantee of the mortgage on the property, acquired or built, it may not be sold until it is lifted. It is normally agreed to be paid in the medium or long term (15 to 30 years)

To apply for it requires a series of requirements, both personal and financial income. Interest rates are the lowest in the market, and terms are the longest. What characterizes the mortgage loan is the amount of money granted by the entity. Factually, it must be used for the purchase or realization of a house on land that you already have or the acquisition of land.

The basic characteristics of this type of credit are the following:

  • Term: very long term
  • Destination: specific
  • Warranty: real property

Note

We recommend you visit our mortgage simulator to find out which mortgage loan would best suit your personal and financial situation. In less than a minute, you will know the best mortgage loans that are being granted. With that, you can also be informed about their main characteristics, among which we find the CAT, the interest rate, the commissions, etc.

Commercial Credits

Credits aimed at SMEs or companies are called productive loans, by which companies are financed and funded for a specific purpose, for example, purchase of raw materials or expansion of a manufacturing plant.

In other words, they are loans oriented to satisfy the needs of Working Capital, acquisition of goods, payment of services oriented to the operation of the same, or to refinance liabilities with other institutions and suppliers.

The basic characteristics of commercial credits are the following:

  • Term: medium to long term
  • Destination: specific
  • Guarantee: diverse, they can be the sales of the company or the machinery that is purchased.

Credit Cards

Credit cards are the source of financing for any person. Its main advantage is an open line of credit, anytime, anywhere, with just one plastic in hand. Like all credit, it allows you to have money that you do not have at the moment, but that you are sure you will have in the immediate future, for example, with the salary that you will receive next month. Credit cards can be divided according to their issuer and can be:

Bank cards, those issued by a financial institution such as a bank or a savings bank or cooperative

Departmental or Retail cards, also called non-bank cards and which are offered by department stores or large department retail stores.

On both cards, the credit card and the departmental one, you can take advantage of month-long promotions without interest and other additional benefits.

To summarize, the characteristics of this type of credit are:

  • Term: very short
  • Destination: free
  • Warranty: none

Personal Loans

Personal loans are characterized by being open credits of free availability, so it should not be informed that they will be used. For this reason, you can use it for any purpose, be it consumption, investment, purchase of goods, remodeling your home, travel, and much more. This fha loan ohio is offered by banks or other financial institutions, as well as by companies (many offer them online) that are exclusively dedicated to granting them.

The basic characteristics of this type of credit are the following:

  • Term: from short to medium term
  • Destination: free
  • Warranty: none

Pledge Credits

The Pledge Credit is specialized financing, in this case, for the purchase of a new vehicle. Also called automotive loans, they have a specific purpose. It is the purchase of a certain vehicle, the ownership of which will remain “pledged” until the debtor pays all the debt. The vehicle cannot be sold until the pledge is lifted (It occurs when the credit is canceled). They offer specialized financing. The advantage of these credits is the precise specialization. The reason is that the amounts and payment plans are designed according to the objective.

The basic characteristics of this type of credit are the following:

  • Term: from medium to long term
  • Destination: specific
  • Warranty: vehicle

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