When filling out a loan application, it is often necessary to specify the purpose of the loan. What is it? How does the purpose of the loan affect the Bank’s decision to issue a loan? What is the http://usapaydayloans.info/california/anaheim/ purpose of the loan is better to specify? Let’s try to find answers to all these questions.
The purpose of a Bank loan – what does it mean?
A target loan is a Bank loan that is allowed to be spent only on certain goals declared before receiving money.
The terms of targeted loans are usually different from those offered for loans without a purpose. Interest rates on targeted loans are often lower than on non-targeted loans. More money. Maturities are longer. Although the latter is often associated with the need to return relatively large amounts.
The targeted nature of the loan is variously combined with other features of the Bank loan. There are long-term and short-term target loans, target loans with and without collateral, etc.
A common feature of all targeted loans is usually the right of the Bank to check the expenditure of the issued amount. Related to the control is the ability of the Bank to fine or otherwise punish an unscrupulous borrower for misuse of borrowed funds. Therefore, those who receive a targeted loan, think about what to write, are always advised to write the truth.
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What is the risk of non-payment of the loan?
The appointment by banks of more favorable conditions for targeted lending may have several reasons:
the Bank takes as collateral the property acquired through the loan;
the Bank does not issue a pledge officially, but knows that in case of non-payment in the ownership of the borrower remains liquid property;
the Bank believes that the investment of credit funds will bring additional income to the client, from which he will be able to repay the loan and interest;
the Bank has special interests in the industry or enterprise for the purchase of which are issued targeted loans;
the Bank carries out a state or corporate order for the provision of preferential targeted loans; this is how the lending of housing for certain categories of the population takes place;
some goals cause the Bank to have more confidence in the borrower, for example – loans for education.
Often the purpose of the loan is associated with several of these points.
In contrast, the purpose of consumer credit is usually not indicated, the expenditure of the money received is not controlled. The Bank does not care for what purpose the funds are taken, it compensates for the greater risk by increased interest or collateral.
