- 1 What are Loans used for?
- 2 Types of Loans and their Attributes
Do you want to take loans to finance your projects and you don’t know which one in particular to apply for? Read this article to know the various type of loans you can apply for.
Loan is the amount of money or other valuables or consideration that an individual, group a legal entity borrows from another individual, group or legal entity (mostly financial institutions) with the condition that it will be returned or repaid at a later date with interest, some with collateral while some don’t accept collateral.
With the situation of things in the country, not everyone can afford their needs such as shelter and some may want to buy car, pay their children school fees, feed their families, so the need to take a loan arises.
When you take a loan, an interest will be attached to it, this interest is the profit of the loaner because if the loaner had used the money for a personal business, he would have made more money.
Financial institutions in Nigeria has made different types of loan available i.e. you have many options to choose from ranging from the small loan to the big one. For some, you have to access the small loans before you can get the bigger ones.
What are Loans used for?
to acquire properties such as land, vehicle, houses etc.
- to finance other loans
- to start up a business
- to settle some expenses
- to pay bills
- for investment
Types of Loans and their Attributes
Loans can be categorized majorly into two namely: secured and unsecured loans. These categories of loans now have different types under them.
1. Secured Loans
Secured loans are the type of loans in which collaterals are collected when taking the loan; Collateral are form of security which can be used to replace the loan collected if the loanee refuses to pay back as at when due. Most banks collect landed property documents as collateral or house document, when the borrower refuses to pay when the loan lapses, the bank can decide to sell off the house in order to cover the loan.
For a secured loan, the collateral involved has to be put into consideration because a person cannot apply for a loan of 5million and want to drop a collateral of 300,000. The collateral has to be in the same range with the loan applied for.
Attributes of a Secured Loan
- Huge loan amount
- Affordable interest rate
- Long repayment period
2. Unsecured Loans
This type of loan does not require collateral, it is mostly given by microfinance banks. This loan is very risky for the bank because the borrower can easily abscond without settling the debt thereby making the company or bank run at loss or fold up at the end of the day.
Attributes of Unsecured Loans
- small loan amount
- short repayment period
- high rate of interest
Other forms of loans includes
These are loans paid on an agreed Installmental basis with a fixed amount. It can be weekly or monthly, depending on what has been agreed upon.
These loans are taken to settle some bills or finance personal projects such as paying utility bills, sorting children school fees and many other things.
These are loans taken to be fully repaid when you get your monthly stipend, it has limited amount that you can borrow and has high interest rate. You can have access to this type of loan online as many money lending app has been introduced such as Kwik money.
These are government loans which attract extraordinary low interest rate. this means that the interest rate is lower than the normal or general in interest rate.