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Bank Loans - What Are The Types?

Back when our grandparents were children, life was much simpler. Those who needed money because their car broke down, simply walked into their local bank and asked for bank loans. Today, even the once simple world of bank loans is complicated! From investment bank loans to personal bank loans, the world of borrowing money is becoming more and more complicated. If you are considering borrowing money from your bank, there are a few things you should know before asking for a loan. These tips will make it certain that you will be able to choose from the best bank loans possible for your situation.

Types of Bank Loans

First, make sure you know what the different types of bank loans are. For example, do you know the difference between personal bank loans and other types? There is a difference!

Personal Bank Loans

Personal bank loans are loans offered to an individual, rather than a group or business. Even personal bank loans have different categories, such as secured and unsecured debt!

Secured Loans

A secured loan is the most common type of personal loan you will be offered. This is a loan that has some sort of possession put up as security for the loan. In other words, if you do not pay back your loan according to the loan agreement, the bank has a right to repossess whatever you put up for the loan. Borrowing against the equity in your home is an example of a secured loan. Your home because the security for the loan amount, and if you do not pay back your loan on time, the bank could repossess your home.

Unsecured Loans

It is far less common for a bank to offer an individual an unsecured loan, but it does happen. An unsecured loan is like a credit card. There is nothing placed as security for the loan. You are simply giving your word to the bank that you will pay the loan back in the terms agreed to. If you do not pay it back, the bank receives nothing. The interest rate of unsecured loans is usually quite a bit higher than secured loans, so the bank ensures they get their money early in case you fail to pay back the loan.

Investment Bank Loan

An investment bank loan is a loan that you take out to make a major purchase, such as your mortgage. These bank loans require credit checks that are somewhat rigorous, because the loans are usually large amounts. Also, they are considered secured loans because if you do not pay them back, the offshore bank accounts can sell off your investment to earn the money you owe them.