Types Of Loans


There are different types of loans available to individuals and businesses. The two most basic kinds of loans include lines of credit and installment loans, which can be either short-term or long-term. They are explained in some detail below:

  • Overdraft – The bank provides financing when required, but only up to a predetermined limit. You can borrow and repay up to the limit repeatedly within the set timeframe.
  • Installment loan –  The lender provides a lump amount at the commencement of the loan. The loan uses a repayment plan with equal payments throughout the year(s).
  • Short-term loan – Used for a particular purpose, and repaid after this purpose has been served. These loans often last less than 12 months.
  • Long-term loan – A formal agreement, often exceeding one year. This loan is generally used for improvements which will increase business profit. Some of these profits are then used to repay the loan amount.