Creditors and Products Available to Investors, Business, and Individuals

A creditor is any financial institution such as a bank, financial company, and credit union, which offers loans and other products. Basically, this is a business or individual that lends money and charges interest. Lenders offer secured and unsecured loans, along with savings and checking accounts and investment products.

Types of financial establishments

Creditors can be divided into unsecured, secured, and preferred. The latter are given priority over other financial institutions. They can make claims on debts, including unpaid commissions, wages, and salaries. Secured creditors offer loans such as mortgages and HELOCs, and borrowers pledge some asset, be it vehicle or house, as collateral. The collateral serves as a guarantee for loan repayment. Unlike them, unsecured creditors offer signature loans for which collateral is not required. These financial institutions look at the payment history of applicants to assess whether they are risky borrowers. Other factors they take into account include annual income, employer and length of employment, debt-to-income ratio, and sources of income.

There are different types of financial institutions, including investment and retail banks, credit unions, online banks, savings and loan associations, and many others.

Retail banks and financial products

Commercial or retail banks offer products such as loans, mortgages, credit cards, savings accounts, and others. Some banks offer products and services online while others have local offices and branches. The former feature low fees and interest charges because they save on office rent, utilities, salaries, and other expenses. They also pay high interest rates on savings accounts and investment products.

Investment banks and specialized services

While some financial establishments specialize in mergers and acquisitions and bonds and stocks, some investment banks function much like retail or commercial banks. They help companies and government entities to raise capital for their daily operations. Investment banks offer a large array of services, from risk and restructuring solutions to strategic advice. They serve customers from different industry sectors, including technology, real estate, healthcare, and communications.

Credit unions and benefits for members

They are financial establishments that are owned by their clients or members. Unlike them, banks are owned by shareholders, not by their customers. Unions offer standard products such as loans, mortgages, and savings accounts, as well as some new services. These include self-service kiosks, mobile banking services, rewards programs, and others. They also offer auto and college loans, and members benefit from lower interest rates.

Savings and loan associations: long-term financing options

Thrifts or savings and loan associations offer mortgage loans and accept deposits. They are either federally or state chartered, and their members or customers are shareholders. Savings and loan associations offer long-term loans and loans for construction, home renovation, and refinancing. They are locally or privately run financial establishments.

Other types of creditors

There are other types of financial institutions that offer mortgages, loans, lines of credit, and other forms of financing. The list includes offshore, postal savings, community development, and ethical banks and building societies. Sustainable or ethical banks are financial establishments that aim to make responsible and ethical lending decisions. Offshore banks are located in tax havens and offer many benefits to their customers. One is no or low taxes compared to international taxation. Another benefit is protection from economic and political instability and risk. In some countries, businesses, corporate investors, and even government entities face political risk and choose to keep their money in offshore banks. Postal savings banks serve customers and offer deposit accounts. In some countries, they also provide education and other loans. Other postal savings banks offer only overdraft lines of credit, which are secured by customers’ deposits. Community development banks usually serve customers in low-income regions and offer commercial, business, and personal loans and savings and checking accounts. Customers can apply for different types of loans, including secondary market, rural development, and home improvement loans. Community development banks also offer refinance, vacation home, and construction loans. In addition to mortgage loans offered to business customers, they provide consumer loans such as loans for vehicles, snowmobiles, boats, vacations, and household appliances. Some banks also feature secured loans and the customer’s certificate of deposit serves as collateral.

Real and personal creditors

There are real and personal creditors, and the latter loan money to their relatives, family members, and friends. Real creditors are banks and other establishments that offer loans to customers. To ensure loan payment, lenders require that borrowers sign a formal contract or agreement. In addition, they may require some type of collateral such as jewelry or vehicle.

Other types of creditors

Payday lenders and pawnshops also offer loans to customers who need quick cash. The former provide short-term loans and charge extremely high interest rates. Pawnbrokers offer secured loans, and borrowers pledge some valuable item as collateral.

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