05 Jan 2024 | Edukatips

Types of Loans to Know Before Applying

When you need money for your business or personal needs, a bank loan in the form of credit can be a solution. For example, a capital business loan, a financing scheme to buy a car or house, and other needs. The Bank will lend money to the borrower, which must later be paid within the approved maturity. However, before a loan is granted, the bank will assess the borrower’s ability to pay monthly installments and interest.

In economics, credit can be divided into various types based on their classification. This allows you to choose a loan that suits your needs. Before applying for a loan, it’s important to first understand the types based on the following classification.

Types of Credit Based on Purpose

1. Productive Credit

Productive credit is a type of loan that can be used to increase income by purchasing an asset. For example, people use the money from productive loans to buy property for rent or use it as business capital to earn income.

2. Consumptive Credit

Unlike Productive Credit, this type of credit is used for personal needs. For example, purchasing a car, electronic devices, or paying house bills.

Types of Credit Based on Terms

1. Short-Term

This credit type has maturities of less than 1 year. Short-term credit can be used for business or personal interests.

2. Medium-Term

Medium-term credit is a loan with a longer installment period than short-term, which is around 1-3 years. This type of credit is often used by Small and Medium Enterprises (SMEs) under Rp100 million.

3. Long-Term

Among the types of loans based on terms, long-term credit is a loan that has the longest repayment period. Usually, this type of credit is used to finance industrial businesses, house purchases, or cars.

Types of Credit Based on Functionality

1. Investment Loan

As the name implies, this type of credit is intended for investment. It is usually used for company activities. For example, opening a business, developing a project, building a factory, rehabilitation, expanding a building, and so on.

Investment loans can support the need for long-term investment financing. It offers a long repayment period, so it is suitable if you wish to borrow a large amount for business purposes.

2. Working Capital Loan

Working Capital Loans are loans provided by banks to borrowers who wish to increase company production activities. For example, to buy raw materials, pay employee salaries, or costs related to the company’s production process.

That concludes the explanation of the types of loans based on their classification. If you’re looking for a loan product that can be tailored to your needs, BCA has an Individual Loan product that offers various types, such as car loans, KPR (Home Ownership Loans), KSM (Motorcycle Financing), and personal loans. For more information about BCA Individual Loan, please click the button below.