Everyone needs money to fund life's necessities and its pleasures & loans are very popular for this. In early days, the bank was the only financial institution that could offer loans. But now there are many companies offering loans. You can search the market to find the bank loan company or bank loan deal that meets your needs.

Need of Bank loan:

• For purchasing a home or vehicle
• For home renovations
• For traveling
• For education expenses
• For buying furniture
• For wedding expenses
• For debt consolidation

How banks work: Banks are not just to offer loans to its customers but they  also take in deposits, offer mortgages and insurance packages. When savings depositors pay banks, the banks need to pay these depositors some interest. The bank is able to use the depositors’ money for investment purposes. One of these investments they could make is providing loans, which they charge interest rates on. 

Types of bank loans: Generally, there are 2 characteristics on the basis of which we can classify bank loans first is the term of loan & the second is the security required to get the loan. 

a) Types based on loan term: The actual length of time for which the money borrowed, is called the term of loan. Loans can be either long-term or short-term.

1. Long-term Loans:  The are commonly used to purchase, 
improve, or expand fixed assets such as your plant, facilities, major equipment, and real estate.
2. Short-term Loans: They are often used to raise cash for cyclical inventory needs, accounts payable, and working capital.

b) Types based on the security: Security or collateral is a guarantee that you give the bank in order to avail a loan. Loans can either be secured or unsecured.

1. Secured loans: A secured loan is any loan that requires the customer to provide the bank with some form of security. It can be borrower's property, real estate or any valuable asset. The value of the borrower’s collateral affects the amount he can borrow. If the borrower defaults on the loan, the bank can recoup the money by seizing and liquidating the specific property used for collateral on the debt.
2. Unsecured loans: An unsecured loan is also a promise to pay a debt. Unlike a secured loan, the promise is not supported by granting the creditor an interest in any specific property, means that you do not offer any guarantee to your lender. If the borrower defaults on an unsecured loan, the creditor has no priority claim against any particular property of the borrower. The creditor can try to obtain just a money judgment against the borrower.