The bank issues loans for various purposes. With the help of credit, you can buy any product in the form of a phone or household appliances, a car, an apartment, make repairs and much more. As a rule, such agreements can be formalized directly at the point of sale, where there are representatives of a particular banking organization. But often you may need money for expenses of a different nature. In this case, you can arrange a loan directly in cash. This type of lending is called untargeted. What is untargeted credit, how to draw it and whether it is profitable, we consider in this article.
To understand what non-earmarked loans are, for a start, consider the types of consumer lending. All loan agreements can be divided into two types:
- target loan;
- no purpose loan.
Trust loan is a type of loan in which money is directed to a specific purpose. Often the client, making out such a contract, pays the initial payment to the outlet and immediately receives the goods. The rest of the money is financed by the bank. And the client, on the basis of monthly repayments, pays a bank loan under an interest rate determined by the terms of the contract.
In this case, the client does not receive cash from the bank. Thus, you can purchase a product, a car and even an apartment. Interest rates on target loans are usually lower than if the borrower issues a non-target consumer loan. In many ways, the interest rate depends on the loan amount.
If the purchased goods are inexpensive, then interest rates on target loans can reach up to 40%. Banking organizations overestimate interest, taking advantage of psychological aspects. Since the borrower is already set to receive the necessary goods, often does not pay attention to the percentage offered by the loan officer.
When buying a car or an apartment, potential customers of banks carefully approach their choice, trying to extract the maximum benefit. Therefore, the proposals of banking companies in this direction are more loyal. Under certain conditions, you can buy a car on credit at 7-10%. Or arrange a mortgage of 10.5%.
Non-earmarked consumer loans
A non-lending loan is a cash loan from a bank. In this case, dispose of the loan amount at its discretion. Use it to purchase goods, pay a down payment on a mortgage, pay for tuition, treatment and so on.
The banking organization will not track your spending. Based on the loan amount, the term of the contract and the interest rate, you will receive a payment schedule. It will be necessary to deposit the amount according to the schedule, while the borrower can repay the principal and interest under the contract ahead of schedule, paying only the accrued interest for the actual use of funds.
Non-target consumer loan has a fairly high interest rate. Thus, the bank is trying to reduce its financial risks, since the organization does not know what exactly you will send a loan to. As a rule, the interest rate is about 30%.
How to make
There are different offers in different banks. Non-earmarked loan can be issued on two documents, but with a higher interest rate, and providing a full package of documents. This package includes the standard:
- Help from the accounting of the monthly earnings.
- Copy of employment record.
Under this condition can be the age of 21 years and work experience of six months at the last place of work.
The contract is drawn up both at the bank’s office and online based on an electronic application. And you can get cash by contacting the cashier of an additional office, or to an account opened with a banking organization.
Thus, if it is possible to arrange a target loan, it will be more profitable for the borrower. The rates for these types of contracts below. A non-purpose lending is better to use when appropriate, and in the absence of options with a targeted consumer credit.