Targeted loans are those loans that are required for a specific purpose and can only be used for that. To date, these products represent the majority of loans granted by banks and financial companies to private customers. An example of a finalized loan is that which is paid to buy a car, or to renovate one’s home.
As we said these loans have an end, a purpose, and can only be used for that. In many cases these are products supplied at very advantageous conditions and can be offered by the sellers of goods or services themselves. In this guide we will analyze the pros and cons of the targeted loans and we will also discover some small secrets to get really cheap ones.
How do they work
First we try to understand in detail how these products work. As we said, the funds are called finalized because they have an end, a purpose and for this reason they must be used. I cannot apply for a car loan and then use liquidity for other expenses for the simple reason that the bank pays the money directly to the seller.
The same will happen in case of loan for renovation of a property. The lender will disburse the capital to the restructuring firm upon presentation of the invoice. When are these loans convenient? In our opinion, they should be requested if no liquidity is needed. In this case, in fact, the targeted loans are far cheaper than a normal loan.
The reason is very simple. Sellers, to facilitate their customers and increase sales, are used to having agreements with lenders. This means that there is a tendency to have lower interest rates (the bank knows that the seller will make them disburse x loans per month and apply better conditions) and faster disbursement times.
In addition, the same seller will leverage the bank’s offices to ensure that the financing is approved and disbursed. If this did not happen, in fact, he could not proceed with the provision of the service or the sale of the goods. In principle, therefore, we can say that the targeted loans are convenient from an economic point of view, but are to be avoided if you need liquidity that you can spend on different needs.
Targeted loans without paychecks
Many ask us if it is possible to obtain a finalized loan without a paycheck. In principle this is possible but on condition that there is a guarantor to guarantee the practice. Alternatively, promissory notes can be signed giving their assets as collateral. These are called promoted loans and have been the subject of our very thorough guide.
It is fundamental to remember that the bank needs any guarantee in order to issue a credit. If you cannot offer a paycheck, you should have a guarantor, that is, a family member or friend who can put a second signature on the loan application.
Funding aimed at the university
Another classic example is that of funding for young university students. These are subsidized products that are provided for the purpose of financing the costs related to the study and post-university training of the children.
With these products you can only finance what is attributable to the study: purchase of books, expenses for a master’s degree, purchase of teaching or IT material and everything that can be used for one’s own study path. As we have said, these are subsidized products that can only be requested by young people who fall into a certain school and who have a high school average.
These funding, in fact, have been designed to guarantee, to those deserving students who do not have the adequate economic means, a high level education both university and post university. For more information, read our Student Loans Guide.
How to finance the purchase of the car
As we said, the car loan is also a very classic example of targeted financing. Indeed, we can emphasize that it is one of the most targeted products.
To date, in fact, almost all vehicles are sold with a loan. Therefore a dealership, which deals with new or used cars, certainly has a very convenient agreement, perhaps stipulated on a national scale directly by the parent company (we will remember all the famous zero rates on vehicles).
Overall, we can therefore say that targeted loans represent a good opportunity to purchase a product or service by paying it in monthly installments. The advice we can give is to have different estimates made, always remembering that what matters is the taeg, that is the effective rate that is applied on the cost of what we buy.