The loans extended by banks are classified in different ways, depending uponthe purpose of the bank classifying them.

1. According to Maturity  

Short-term Loans. Short term loans are those paid within any period upto but not more than one year. Consumption credits, mercantile credit,retail credit, import or export credit are generally, loans under this type.

 Medium-term (or intermediate) Loans. Medium-term loans are thosepayable after a period of one year but not exceeding five years. Most farmloans or equipment loans fall under this category.   Long-term Loans. Long-term loans are those that   are   payable withinperiods longer than five years up to twenty-five or more years. Real estateloans, industrial loans, investment loans, developmental loans belong tothis type.

 Demand (or call) Loans . Demand loans are loans demandable by thebank within the period of twenty-four hours. The two main purposes of thiscredit are:

a) To restore the position of a bank whose legal reserve isdeficient of the legal reserve requirement; and

b) To finance the buying and/ or selling activities of securities or stock brokers.

2. According to Security  

Secured Loans. Secured loans are those backed up by any propertyacceptable by the bank, and are pledge as collateral to fulfill therepayment of the loan in case of default of the debtor. Examples are realestate loans, Chattel mortgage   loans,   and crop loans.

 Unsecured Loans. Unsecured loans are not backed up by property of any kind. Consumption loans in general belong to this type.

3. According to Purpose

  Agricultural Loans. Agricultural loans extended by our banks todayinclude equipment loans, crop loans, real estate loans, commodity loansand the “Masagana 99”. These loans may be either short, medium; or, consumption or productive; or, of domestic or foreign source.  

Commercial Loans. Commercial loans extended by banks are used for the financing of trade and commerce, particularly for production,manufacture and marketing of goods. The primary aim is to providemerchants with adequate working capital. This type of loan can be short or medium term; or secured or unsecured, depending upon the degree of risk.  

Investment Loans. Investment loans of this nature are for the financingand construction or purchase of fixed capital for use in business. Theproceeds could also be used to purchase stocks and bonds of alreadyexisting stable corporations, such as those loans extended to members of the SSS or GSIS.  

Consumption Loans. Consumption loans, as the term implies, refers toall those advances for the purpose of promoting the consumption activitiesof the individuals. The proceeds are used for either the payment or purchase of final goods and services for the buyer.  

Industrial Loans. The proceeds of this loan is for he financing of manufacturers’ productive activities. These are usually big loans whichrequire the substantial banking of the securities that are satisfactory to thelending bank.  

Development Loans . Developmental loans are extended for the purposeof speeding up the economic development of the economy. The primaryaim of this type of loan is to help those engaged in productive activitiespromote and accelerate production, employment, income, and standardliving.

Real Estate Loans . Real estate loans are extended generally to homebuilders, subdivision owners or developers and to business firms in order to purchase or improve real estate property for the purpose or another.

4. According to Purpose  

Direct Loans. Direct loans are those made directly to the makers of promissory notes, the interests of which are collected at the date of maturity together with the principal.  

Discounts. Discounts are advances whereby the bank deducts theinterest at the time the loan is granted from the face value of thepromissory note or commercial paper for the purpose of encashing itbefore the date of its maturity.  

Rediscounts. Rediscounts are those advances made on commercialpaper which have previously been discounted.  

Overdrafts. An overdraft refers to a special banking accommodationwhereby the amount appearing on the face value of a check, acceptance,promissory note, or other similar commercial paper, exceeds the funds onwhich the instrument are drawn.

5. According to Method of Release  

Lump Sum. Lump sum releases are loans that are granted in their entireamount to bank barrowers. Usually these are small short-term cash loansof consumption.  

Installment. Installment releases refer to the loans involving largeamounts and for long-term. Generally, in granting real estate loans, banksrelease the first fifty percent of the face value of the loan upon the borrower’s meeting some conditions and requirements.

6. According to Manner of Repayment  

Lump Sum . Lump sum payment loans are those repaid by borrowers at the agreed date of maturity in their entire amounts. These are the smallloans and usually consumptive in nature.  

Installment. Installment payments are made by the bank’s borrowers in small amortizations in order to assure full repayment of the loan andinterest at the date of maturity without much difficulty on the part of borrower.  

Self-liquidating Loans. Self-liquidating loans extended by theDevelopment Bank of the Philippines, Private Development Banks, thePhilippine national Bank, and Rural Banks are those loans, the repaymentof which whether in lump sum or by installment, comes from the incomeof the investment to which the loan was applied.  

Non-self-liquidating Loans. Non-self-liquidating loans are those loansthe repayments of which are made from the income of the borrower regardless of its source.