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.

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