Learn about the various types of loans available at financial institutions
Banks, digital lending platforms, and other such financial institutions are known to provide loans to their customers. There are different types of loans available in the market, each customized to address a particular type of need. Personal loans, education loans, mortgage loans, and various other types can be found at any financial institution.
Before applying for any loan, you must know about every information and credit underwriting process. Here are the different types that are available on the market.
Different loans that you can apply for at any financial institution:
● Conventional loans: A conventional loan is a type of loan which is not backed or insured by any government authority. These are mostly available at private banks, mortgage institutions, credit lenders, or other such financial institutions. These types of loans can be further divided into two types — conforming and non-conforming loans.
- Conventional conforming loans: Conventional conforming loans are loans provided by private financial institutions that follow the lending and credit underwriting process rules set by the government. The borrower’s debt-to-income ratio and credit history are some of the values that are taken into account during the credit underwriting process of this type of loan.
- Conventional non-conforming loans: These types of conforming loans are provided by financial institutions but these do not adhere to the lending rules set by the government. You can apply for these when you need a larger loan amount than what is provided to you by the conventional conforming loan.
● Secured loans: A secured loan is that type of loan where the borrower provides a mortgage to the bank or digital lending platform, for a loan amount. On defaulting the loan, the bank or digital lending platform gets the rights to the individual’s property transferred to them to recoup their losses. In a secured loan, the borrower can mortgage or leverage their real estate, vehicle, saving bank account, fixed deposits, etc. The evaluation of the property, the length of the loan, and the credit history of the individual are some of the factors that are used to determine if a person can get a secured loan or not.
● Unsecured loans: In an unsecured loan, the borrower does not have to submit any personal property as a mortgage to the bank or digital lending platform for the loan underwriting process. The interest and the amount of the unsecured loan are determined by the credit score, credit history, and income of the individual. An unsecured loan is also called a personal loan.
● Open-ended loans: In an open-ended loan, the borrower can get a fixed credit from the bank or digital lender after they have paid back the original loan amount. Credit cards are a good example of open-ended loans. The borrower gets a fixed credit each month that they have to pay back to the lender in the next month repeatedly.
● Close-ended loans: In a close-ended loan, an individual cannot borrow from the bank or digital lender again after they have received the loan amount subsequently after the loan underwriting process. Student loans, home loans, and vehicle loans are some examples of close-ended loans.
During an emergency, you can get one of the discussed loans depending upon your requirements. Make sure to inspect them carefully before applying as every loan is different and has its own terms, conditions, and loan underwriting process. You need to explore and understand every type of loan available before choosing the one that is most suitable for your needs. This will allow you to get the loan amount quickly and you can use it for your emergency .
