The Types Of Credits/ Advances Of Bank

Almost every commercial bank provides loan system for their customer. A customer can take loan for various purpose. Now lets see how many most popular loan/ advance systems are available on banking system.
We can classify the credits of a bank by the following way:

1. Cash credit
2. Time loan/ Demand loan/ Term loan
3. Bank overdraft
4. Loan against trust certificates
5. Consumer credits
6. SME (Small and Medium Enterprise)

Types of bank loans

Cash Credit:

Bank Cash CreditGenerally cash credit is issued to the businessman. It is used for commercial purpose. The borrower has to open a bank account. The bank grants the maximum limit of money to that account. Now the borrower can withdrew money from that account, as he or she needed. Again the borrower deposits money in the account, when he received the final payment from his customers. The main theme of this credit is that borrower pays interest only on the withdrawal amount. Intent is calculated on day basis. How many days the borrower use the loan have to pay interest on that day. Cash credit can be in two types. One is cash credit (Hypothecation) and another one is cash credit (Pledge).

Time loan/ Demand loan/ Term loan

Time loan is granted for any specific amount for nay specific period. The borrower has to pay interest on total loaned amount for a specific period. Those kinds of loan may be short term, Mid term and Long term.

Bank overdraft

When a businessman withdrew the money from his bank account excess of his/ her deposit money that excess amount is called as bank overdraft.

Loan against trust certificate

When bank grant any loan to the customer keeping his/ her various trust certificates as guarantee, that kinds of credit is called as loan against trust receipt. Generally customer keeps his DPS certificates; FDR certificates to the bank sanction the credit on the guarantee of the trust certificates.

Consumer credit

Bank Consumer LoanWhen bank grant loan to the final consumer where loaned money is used for purchasing any product or for personal purpose not for the business purpose is called as the consumer credit. Most of commercial bank of our customer offers various consumer credits to the customer as for example:

a) Personal any purpose loan.
b) Home application loan (To purchase TV, Freeze, Computer etc.)
c) Automobile loan (To purchase any car)
d) Education loan (To take higher degree from reputed institution)
e) Marriage loan.

SME loan

Bank SME LoanSME stand for Small and Medium Enterprise. Nowadays SME loan is most common and popular credit item of any commercial bank. All the bank concentrate on the SME sector, because new established small business are playing vital role in the national economy. For this purpose along with National bank, Multinational bank also open their SME units in all branch.

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