The Difference Between a Commercial & a Consumer Loan

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BusinessDictionary.com describes a consumer loan as money loaned to a person, while a commercial loan is loaned to a business. Consumer loans are regulated by the government, according to consumer protection law.

Types

  • Consumer loans include personal, home equity and automobile. Commercial loans can be secured, meaning the company has put something up as collateral in case they default, or unsecured.

Features

  • Commercial loans are given for 30 days to a year before they become due while consumer loans can be paid back over many years.

Function

  • Commercial loans are used by companies to buy equipment or grow their business. Consumer loans are used by people to purchase cars, remodel homes, and other personal uses.

Benefits

  • Both loan types offer ways for people to pay for big-ticket items over time instead of all at once in a big lump sum.

Considerations

  • Businesses considering a commercial loan should be prepared to have insurance for whatever item they are financing and sending periodic financial statements to the bank.

References

  • Photo Credit Comstock/Comstock/Getty Images
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