What loan types there are and what features they offer

Personal loans or mortgages applied for with or without an endorsement, etc. You have to know the details before applying for one.

A bank loan is a transaction in which a finance entity provides a customer a certain amount of money (established previously) by means of a contract, under which said customer has the obligation to repay the money within a specific time frame. Usually, the amount of money loaned by the bank accrues interest that must also be repaid, which will vary based on the type of loan requested.

Therefore, a bank loan is a commitment that must not be taken lightly. It is also important to find out what its characteristics are beforehand in order to make the most of it. You must know what types of loans exist in order to ask the bank for the one that best suits your needs.

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What does a loan involve?

Before we explain what different types of loan exist, it is important that you understand what a loan involves so there are no misunderstandings or confusion when you request this type of product.

  • Capital: amount of money requested from the bank.
  • Interest: price the customer pays the bank to be able to use the loaned capital.
  • Term: period of time specified in the contract in which to repay the principal and interest.

Loan types

Although there are different types of loans, they all fit into two major categories called personal loans and mortgages.

Personal loans are used to finance a customer's specific needs over a certain period of time. As a general rule the principal or amount economic requested in this type of loan is small. Within the personal loans they are, for example, so-called consumption loans , fast loans and loans of studies. Consumer loans are used to finance durable consumer goods such as a car. The loans fast, also so-called "loans immediate", are anyone who look for be agile in the response to the application of a loan. Whereas, student loans (as the name suggests) are designed to cover the cost of graduate and postgraduate studies and university exchanges such as the Erasmus program.

In the simulator of loans of BBVA's website, can see the personal loan types that offers the bank. Accesses and simulates your loan here are or not are customer and checks your conditions depending on the cash amount that wanted request. BBVA offers up to ten different types of loans within this category: this is a clear example of how varied these loans can be.

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Mortgages are designed to finance the acquisition of a house and, sometimes, to help set up a business. As well as involving larger amounts of money than a personal loan, mortgages also provide the bank with a security interest. This means that if the customer does not repay the loan, the bank can have the mortgaged property sold in order to recover the debt, or acquire ownership of it.

In addition to the two types of products described above, loans also differ depending on whether or not they are subject to a guarantee. When requesting a loan, a guarantee is used to confirm that you will comply with your financial obligations. The guarantor states that they will honor the guaranteed party's commitment to repay the loaned capital plus interest in the event the borrower is not able to. Guarantors must have the following characteristics (among others):

  • Being of legal age: this requirement may be waived under certain isolated and exceptional circumstances.
  • Be solvent: the guarantor's income must be higher than the obligations the party requesting the loan agrees with the bank.
  • Stable income: as well as being solvent, the guarantor must also have guaranteed income (wherever possible).
  • Own unencumbered real estate: this requirement is particularly important for mortgages, as the guarantor may have to cover the loan conditions with their own property.

Having a guarantee significantly improves your chances of getting the bank to approve any kind of loan. It is also worth remembering that if the recipient of the loan fails to repay it, the guarantor must pay the debt using their current and future assets.

You can see all the information about loans and try the calculator on the BBVA website.

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