Many people take a loan from a bank if necessary. Loan is one of the main activities of the bank. The way to get a bank loan is a desirable thing for many. Bank loans benefit both the customer and the bank. Before taking a bank loan, you should know the essentials of the loan.

However, many people in our country can not take a loan because they do not know the way or rules to get a bank loan. Let’s find out what is a bank loan, the types of bank loans and how to get a bank loan.

What is a bank loan?

Loan means borrowing or borrowing, it is known to all of us. If necessary, we borrow money or other things from family, friends or relatives. Even It is possible to take mobile balance and loan. Besides you on mobile You can also take MB or internet data loan. This loan has to be repaid from the account balance later. In the case of banks, the issue of loans is very similar.

When a bank lends money to a customer for a certain period of time, that money is considered as a bank loan. However, the condition is that the customer has to pay interest to the bank at a fixed rate monthly or annually along with the repayment of the loan.

Types of bank loans

Bank loans can be divided into three parts on the basis of term. E.g.

• Short Term Loans: Short term loans are usually for 1 to 2 years. Short-term loans are mainly for business needs. Higher interest rates apply to these loans. Weekly repayments can also be availed if the loan period is very short.
• Medium Term Loan: Medium term loan is basically for 2 to 5 years. It can be called a loan between short term and medium term loans.
• Long Term Loan: Long term loan is for a period of more than 5 years. Most long-term loans are secured.

How many types of bank loans

In addition to the above types, bank loans can be further divided into different types. Because there are different types of bank loans, for example

• Personal loan: Loans for personal use
• Business loan: Loans for doing business or using business
• Home loan Loans for buying or building a home
• Auto loan Loan to buy a car
• SME loan: Loans for small and medium sized businesses
• Education / Student Loan: Loan for study purposes
• Expatriate loan: Loan to go out of the country
• Agricultural loan Loans for agricultural work
• Quick loan Emergency loan

Learn more: Rules for opening a bank account

Reasons why banks give loans

If you want to take a loan from a bank, it is mandatory to show the reason for taking a loan. The reasons for giving some significant loans are:

• For personal use
• Building a house
• To buy a car
• For treatment
• To study
• For trade and commerce
• For agriculture
• To go abroad
• Immediate help in disaster or danger

Banks that give loans

We already know that lending is one of the main tasks of a bank. Lots of Bangladesh BankE provides almost all types of loans mentioned. However, the interest rate and monthly installments of each bank are different. So before taking a loan, you must know the interest rate and monthly installment of the bank from which you are taking a loan.

Loan Terms

In case of giving loan, the bank will provide some conditions, that is normal. You can apply for a loan only if you meet the conditions set by the bank. In case of loan, the bank will want to know

• Why the loan is being taken
• Credit history
• Personal information
• Job or business experience
• Customer plans to use the loan money
• Financial statement
• Cash flow statement
• Previous Loan Information (if any)

Documents required to get a bank loan

The same type of paperwork is required for most bank loans. Here are the possible documents to get a bank loan:

• Properly filled application form with signature
• Recently taken pictures
• Photocopy of National Identity Card / Driving License / Passport
• Office ID photocopy
• Salary certificate
• Copy of any utility bill
• Trade license
• Copy of income tax return
• Checkbook page
• Bank statement

In case of taking a loan, a guarantor has to be added on behalf of the borrower. Guarantor’s photo, NID, office ID, etc. documents are required. If the borrower fails to repay the loan, the guarantor has to answer to the bank. Witness will also be required.

Note that the required documents may vary depending on the loan you take. Usually the bank informs you what documents are required to get the loan.

Application for bank loan

Once the paperwork and applicable conditions have been completed, you will need to apply for a bank loan. In case of loan application, the application form has to be filled by providing proper information, such as: reasons for taking loan, amount of loan, etc. This application form will be given from the bank.

If you apply by filling out the form, the bank may call you for an interview, where you will be asked for details about the loan information. After that verification will be done from the bank. After verification, you will get your loan money in the bank account as soon as possible.

Things to keep in mind before taking out a loan

If necessary, there is no obstacle to take a loan from a bank. However, there are some things to keep in mind when taking out a loan. E.g.

• The amount of loan repayment is determined on the basis of credit score. So it is better to know the credit score when taking a loan
• Before taking a loan from a bank, you must know the details of the bank from which you are taking a loan, the interest rate of the bank, the term of the loan, the monthly installment etc.
• Learn about the processing charges applicable to the loan process
• In case of late repayment of loan, usually 5 to 10 percent late payment charge is applicable. So don’t forget to know about late payment charges before taking a loan
• A certain amount can be accepted as a prepayment charge before taking a loan, which is very important to know.

Benefits of bank loan

There are many benefits to taking a loan from a bank. E.g.

• The loan can be repaid on time based on the term of the loan
• A bank loan can help you reach a goal ahead of time
• Since the interest is fixed in advance, it is possible to plan for payment
• The interest rate on a bank loan is much lower than the interest rate on a loan from a credit card or moneylender.
• In many cases you can get a loan at a nominal interest rate, if you work for the organization or have an agreement with them.
• In addition, there are currently Islamic bank loans (alternatives) through which banks promise to provide financial assistance in an interest-free manner.

Disadvantages of bank loans

Since there are advantages, there will be disadvantages. Some of the significant disadvantages of bank loans are:

• The process of approving a bank loan is very strict, which makes it difficult for anyone to get a loan.
• Since there is no benefit in borrowing money for education, medical treatment or building a house, interest money may seem too much.
• There is a risk of losing a house or car if you fail to repay the loan on time.
• The various additional fees applicable to a bank loan can increase the burden of the loan

Bank loans and credit cards

There are differences between taking a bank loan and a credit card issued by a bank. Bank loan interest tends to be lower than credit card interest. So if you need extra money for certain expenses, it is better to take a loan without using a credit card.

Learn more: What and how to get a credit card

Ways to get a bank loan – Basics

Most people need a loan when they need money. Things to consider before taking out a loan. Take out a loan considering whether paying extra interest on the loan is appropriate for you. If you want to avoid interest, try the options of Islamic banking.

Frequently Asked Questions and Answers on Bank Loans