Friday, April 15, 2011

What is difference between commercial and consumer loans?

What is difference between commercial and consumer loans? this question was asked by an examinee along with other questions. Beside replying to her I am sharing my thoughts here on my blog so others can also benefit.


Commercial Loans are for business purposes. Usually given to companies to meet their various business needs. There are many types of such loan depending upon the requirement of the business. 


Whereas, 


Consumer loans are those loans which are required by a person for their personal needs. 


If a car loan(finance or lease) is obtained by a company/individual for commercial purposes it is a commercial finance where as if the same kind of car loan is availed by a an individual who would use that car for his personal needs and would not gonna earn rent from that car that is considered a consumer loan. 


Hence, we can say that consumer loans would not become a source of earning for the borrower, however, commercial loans might help him earning more profits. 


Some examples are as follows,


Commercial Loans,
Running Finance, Cash Finance, Term Finance, Export Finance, FATR, FAPC II etc


Consumer Loans, 
Credit Cards, Personal Finance, Car Finance, Mortgage Finance

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