Types of Loans
1. Secured
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property.
The financial institution, however, is given security - a lien on the title to the house - until the mortgage is paid off in full.
If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, the car may secure a loan taken out to purchase a new or used car, in much the same way as a mortgage is secured by housing.
The duration of the loan period is considerably shorter often corresponding to the useful life of the car.
There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer.
An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
2. Unsecured
These may be available from financial institutions under many different guises or marketing packages:
• credit card debt
• personal loans,
• bank overdrafts
• credit facilities or lines of credit
• corporate bonds
1. Secured
A mortgage loan is a very common type of debt instrument, used by many individuals to purchase housing. In this arrangement, the money is used to purchase the property.
The financial institution, however, is given security - a lien on the title to the house - until the mortgage is paid off in full.
If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it.
In some instances, the car may secure a loan taken out to purchase a new or used car, in much the same way as a mortgage is secured by housing.
The duration of the loan period is considerably shorter often corresponding to the useful life of the car.
There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly to a consumer.
An indirect auto loan is where a car dealership acts as an intermediary between the bank or financial institution and the consumer.
2. Unsecured
These may be available from financial institutions under many different guises or marketing packages:
• credit card debt
• personal loans,
• bank overdrafts
• credit facilities or lines of credit
• corporate bonds