Lending types

A loan is a contract under which a lender gives a borrower money for a set period, and the borrower agrees to repay it together with interest and any other costs stated in the contract. There are many types of loans, and they differ considerably in amount, term, cost and borrower requirements. Below are the main loan types you will find in the AllCredits catalogue and what to look out for when choosing each of them.

General borrower requirements

Requirements depend on the lender and the country, but most lenders have similar ones:

• Age. You must be of legal age. Many lenders also set a higher minimum age and a maximum age — the exact limits are shown on the catalogue cards.
• Residence and bank account. As a rule, you need to live in the country where you are taking out the loan and have a bank account there: it is often used to verify your identity and pay out the money.
• Regular income. The lender assesses whether your income is enough to cover the monthly payments. You may be asked for a salary certificate, a bank statement or tax authority data. Self-employed borrowers are usually asked for income information for the last one or two years, and some lenders do not lend to the self-employed at all.
• Stable employment. Many lenders prefer borrowers who have worked for their current employer for several months. A fixed-term employment contract may limit the loan term.
• Credit history. The lender checks your payment history and existing debts in credit databases. Late payments and unpaid debts reduce your chances of getting a loan or make it more expensive.
• A loan only for yourself. The loan is taken out in your name, and you are responsible for repaying it. Don’t take out a loan for someone else: if they don’t pay, the debt stays with you.

Learn more in the article “Requirements and criteria”.

Free first loan

Some lenders offer new customers a first loan with no interest or fees. It is usually a small amount for a short term and is essentially a promotion that helps the lender attract customers.

The key condition is to repay the loan on time and in full. If you pay late, interest and penalties are charged, and a free loan can turn out to be very expensive. Read the promotion terms carefully before applying. Lenders with such offers are listed on the “Free credits” page.

Fast loans

A fast loan is one that is processed and paid out quickly — often on the same day. This speed is possible because you apply online and the borrower check is automated. These are usually small amounts with no collateral or guarantors.

Convenience has a price: fast loans are usually more expensive than bank loans. So compare not only how quickly the money arrives, but also the annual percentage rate (APR) and the total amount to repay. A fast loan suits an urgent expense you are confident you can cover soon, but not a permanent shortage of money. Lenders are listed in the “Fast credits” section.

Loans from age 18

Some lenders issue loans from age 18, although many set a higher minimum age. The requirements for young borrowers are the same: regular income, a bank account and no outstanding debts. A student without a permanent job will find it hard to get a loan, as a student grant is usually not considered sufficient income. Your chances are better if you have a job or a co-borrower with an income, such as a parent.

Your first loan lays the foundation of your credit history. A late payment, even on a small loan, can later make it harder to get a mortgage or car loan, so only borrow an amount you are sure you can repay. Lenders are listed in the “Credits from 18 years” section.

Car loans

A car loan is used to buy a new or used car, a motorcycle or a motorhome. It is repaid in monthly instalments over an agreed term. The car often serves as collateral, so the rate may be lower than for a regular consumer loan. A common option is leasing, where the car belongs to the leasing company until it is fully paid for.

The requirements are the usual ones: legal age, residence and a bank account in the lending country, and a regular income. Some lenders ask for a down payment, and with leasing you are often required to take out comprehensive (KASKO) insurance for the car — include these costs in your budget. Learn more on the “Mortgages, car loans” page; lenders are listed in the “Auto credits” section.

Mortgage loans

A mortgage loan is used to buy or build a home and is secured by the property. It is the largest and longest type of loan: it is usually taken out for 20–30 years. Thanks to the collateral, the mortgage rate is usually lower than for consumer loans.

Mortgages are most often issued by banks, and a down payment is usually required — part of the property price from your own funds. In addition to interest, take into account the costs of property valuation, the notary, registering the mortgage in the land register and insurance. In many countries the mortgage rate is linked to Euribor, so your monthly payment may change. Learn more on the “Mortgages, car loans” page; lenders are listed in the “Mortgage credits” section.

Consumer loans

A consumer loan is issued to individuals for personal needs: buying appliances, home renovation, travel, medical treatment and other expenses. As a rule, it can be used for any purpose — you decide how to spend the money. It usually requires no collateral and is repaid in equal monthly instalments.

The cost of the loan depends on the amount, the term, your income and your credit history. Before applying, estimate your monthly payment with the loan calculator and make sure it fits comfortably into your budget. Learn more in the article “Consumer loans”; lenders are listed in the catalogue section “Consumer credits”.

Short-term loans

A short-term loan, sometimes called a payday loan, is taken out for a period from a few weeks to a few months. It is used for unexpected expenses — for example, when a large bill arrives or your car needs urgent repairs.

The main drawback is the high cost: on an annual basis, short-term loan rates are usually much higher than bank rates, and penalties grow quickly if you pay late. If you realise you can’t repay on time, contact the lender straight away: you can often agree on an extension or a new schedule, which will cost less than falling behind. Don’t take out a new loan to repay an old one. Lenders are listed in the “Short-term loans” section.

Long-term loans

A long-term loan is usually one taken out for several years. A longer term reduces the monthly payment, so such loans are used for large expenses or to combine several loans into one.

However, the longer the term, the more interest you pay overall. Check whether the rate is fixed or variable, and look at the early repayment terms. In the EU, borrowers have the right to repay a consumer loan early, and the lender may charge only limited compensation for this. Lenders are listed in the “Long-term loans” section.

The links above lead to lenders in Latvia. For lenders in other European countries by loan type, see Fast loans in Europe, Consumer loans in Europe, Long-term loans in Europe, Car loans in Europe and Business loans in Europe.

The AllCredits catalogue is free to use and requires no registration. We collect information about lenders but do not issue loans ourselves — the final terms are always set out in your contract with the lender.