Standard Loans

In Finance, Lending is the “act of providing money temporarily on condition that the borrowed money or its equivalent will be returned, usually with interest fee”. Lending operations is the main source of income of banks. The types of loans that banks offer vary according to each bank’s charter.

The ”Standard loans” in a “Rural Bank” are loans that respond to the needs of a “rural community”. The “Standard Loans” for a “Commercial Bank” are mainly designed for clients in the “commercial sector”. The “Standard Loans” in a “Universal Bank” include, but are not limited to, commercial loans, industrial Loans and all other types of loans that a particular universal bank’s charter allows; a universal bank differs from non-universal bank in that it is allowed by law to perform other financial services that specialized banks are not allowed to do (e.g. underwriting, asset management, trust services and investment banking services.).

But “Standard Loans” for whatever kind of bank has common denominators: purpose, term, security. All loans are granted for a specific purpose. All loans have term limits. All loans require collaterals.

Borrowers obtain loans to finance certain income-producing purposes; some common loan purposes: Commercial, Industrial, Agricultural, Housing. The term limits among banks do not greatly vary: Bank loan’s term ranges: Short (30 days-1 year), Medium (Over 1 year to below 3 years) and Long (3 years-above). Some loans are secured by real estate, chattel, Cash-in-Bank or Character; a loan granted with the borrower’s character as security is also called “clean or unsecured loan”. Unsecured loans are usually backed by guarantors. Banks selectively grant unsecured loans to their most valued clients.

The main factor that Standard Loans have in common is the relative uniformity in interest rates. Interest rates are regulated by the Central bank in a country, but it is dependent on the stature of the country’s economy. In special cases, some Central Banks Development Banks can offer lower interest rates to its specific types of borrowers.

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