Types of credits

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exist different ways to get the financing you need, whether it is for your business or for you individually. One of the most traditional and most used ways is to apply for a bank loan. In this post we are going to tell you the types of credit that you can find. 

Types of Credits

online credits

To understand what online credit consists of, the first thing we must be clear about is what the definition of credit is. 

A Credit is a financial product which grants an amount of money to those who request it for a time agreed upon by both parties.. Normally, a credit account is created where the applicant has

The credit holder is the one who decides How and when do you spend that money? and how you are going to return it. 

So, an online loan meets this definition with the exception that The request is made through an online platform.

Obtaining this type of credit is relatively easy thanks to the advancement of new technologies, but like a normal credit, you need to follow certain steps to be granted it: 

  • Find out about online platforms that grant credits: Thanks to new technologies, getting information is very easy. Look carefully at all the options you have and choose the one that most closely resembles what you are looking for. 
  • Use loan simulators: Many of the online platforms, both banking entities and credit platforms, offer the possibility of using a simulator so that you can get an idea of the credit you can access, and its characteristics.
  • Apply for credit on the platform or entity that best suits you.
  • Demonstrate your financial solvency: As in traditional credit applications, demonstrating that you are solvent and can afford the credit is an essential characteristic for it to be granted. 

There are also different types of online credit that you can find on the different platforms: 

  • quick credits: This type of credit is appropriate when the client needs a small amount, but the repayment period is long. The loan limit is usually around 10 thousand euros and the maximum period to repay it is between 4 and 5 years. 
  • Micro credits: In this case they are also small amounts, but more than in the previous case. We can find credits of up to 1500 euros, but their repayment period is very short. 

The disadvantage of this type of credit is that The interests associated with the repayment of the credit are not exactly low. That is why they should not be taken into account as a regular means of financing, but rather they should be something specific. 

Another way to get credit online, and which is gaining more and more weight, is Crowdlending. In this case, it is financing intended more for companies than for individuals, and it is rare to find concessions for individuals. If you want to know more about Crowdlending we will tell you here

documentary credits

In this case, the documentary credits refer to the payment against documents. It is a credit used mainly by companies that trade products among themselves. 

In this case, The seller does not send the merchandise until he is aware that there is a documentary credit in his favor and the buyer's bank does not have the shipping document of the merchandise in its possession. If these two characteristics are not met, the payment will not be made.

We can find different types of documentary credits: 

  • Revocable: In this case the buyer can cancel the purchase before making payment. 
  • Irrevocable: Once the process has started, it cannot be cancelled. This way, payment is guaranteed as long as the necessary and correct documentation has been provided. 
  • Confirmed: In this case, a third bank comes into play, which is in charge of guaranteeing the payment if the buyer's bank does not do so. 
  • In sight: In this case, a cash payment is made at the time the documentation is presented.
  • In term: Payment for the merchandise is deferred from the moment the documentation is delivered until the stipulated period has passed. 

Subprime Credits

Subprime loans are a type of exclusive credit of US financial entities. The main characteristic is that the risk of default is much higher than other types of credit. This is because They are more demanding with solvency or the method of returning the money. 

They are mainly used to deal with subprime mortgages and are aimed at clients who have low solvency, hence the greater risk of non-payment. 

These are some of the Characteristics of Subprime loans

  • Most credits of this type are mortgage credits
  • The interest rates are much higher than average of other credit modalities. 
  • The Commissions charged by credit institutions for subprime loans are also much higher than average. 
  • US banks have a limit of credits of this type that can be offered or granted, since the limit is set by the Federal Reserve due to the high risk of default. 

Finance your company with Alter Finance

Are you looking for financing for your company? At Alter Finance we can help you. 

We are experts in alternative financing and we can advise you about what is the best method to obtain the financing you need for your business. 

contact us now and speak with one of our financial advisors. 

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