The terminology commonly used by banks and financial institutions is not always easy for common people to understand.

The different types of loans and credits and the subtle differences between some of their conditions cause confusion in the consumers.

Personal Loan

One of the most common types of loans is personal loan.

This type of loan consists of granting certain amounts of money to cover the payment of some durable good or service, such as a car or an appliance. However, the fact of having such a generic name causes most people to use the term “personal loan” to designate any type of credit or loan.

To learn how to differentiate between personal loans and other types of credit, continue reading this article.

Personal Loan vs Credit Card

Credit cards and personal loans offer the same financial solution. They provide liquidity to meet certain expenses, whether unforeseen or not.

However, financing through a credit card is not the same as financing through a personal loan. The latter makes it possible to cover expenses with much higher amounts, to be repaid in longer repayment terms, while credit cards provide liquidity in the very short term, quickly and flexibly.

Personal Loan vs Mortgage Loan

Mortgage loans are loans intended for the purchase of a home. It is a money that the bank grants the applicant with the sole purpose of making payment for their home.

On the other hand, personal loans can be used for other types of expenses, such as the purchase of a vehicle. In addition, the interest on mortgage loans is usually lower. On the other hand borrower is required to pay significant amount of money and the payment of other charges such as processing costs or the registration of property, etc.

Personal Loans and Fast Loan

Fast loans are usually granted by online financial institutions and have much more flexible conditions when granted than traditional personal loan.

Fast loan or instant loan or quick loan can be obtained in less than 15 minutes, with hardly any paperwork and, in some cases, without the need for payroll or collateral. This type of credit can even be accessed by people who are included in a list of delinquents. On the contrary, the amount of money to which the client has access is usually less than in a personal loan.

Comparison – Personal Loan and Consumer Loan

In this case, two types of loans are similar, although in the case of consumer loans they are for durable goods or services, such as arranging a wedding or a trip. Consumer loan usually have to be repaid over a period of 1 -3 years whereas personal loan tenure is longer than that.

Read more: Consumer loan pros and cons

Personal Loan and Commercial Credit

While personal loan are granted to common individuals, commercial loans are granted to legal persons, i.e. companies, with the aim of enabling them to incur various expenses arising from their activity.

Personal Loan vs Student Loan

As the name suggests, student loans are intended to meet the needs of students, especially university students. More and more entities offer this type of loans that usually have more flexible conditions than personal loan.

Differences between Personal Loan and Consolidated Credit

Consolidated credit consists of a sort of reunification of all the credits and loans that a person has outstanding. Therefore, a consolidated credit can comprise different personal loans.

Hope these complicated banking terminologies has become a little clearer for you.

Author Bio:

Hi, I am Nikesh Mehta owner and writer of this site.

I’m an analytics professional and also love writing on finance and related industry. I’ve done online course in Financial Markets and Investment Strategy from Indian School of Business.

I can be reached at nikeshmehta@allonmoney.com. You may also visit my LinkedIn profile.