You’re sitting across from a bank officer in Dhaka, and she’s asking, “Which loan account do you need?” Your mind goes blank. Continuous loan? Demand loan? Secured? The terms blur together, and that familiar knot tightens in your chest because one wrong choice could mean years of financial stress.
Here’s the truth most people discover too late: the loan account type shapes everything, from how interest compounds to when you’re considered “defaulted” and how quickly your CIB score crumbles. We’re going to walk through this together, cutting through the banking jargon with real Bangladesh context, current numbers, and the kind of honest clarity that lets you sleep at night.
Keynote: Types of Loan Account
Bangladesh Bank recognizes four fundamental loan account categories: Continuous Loans (Cash Credit, Overdraft), Demand Loans (trade finance instruments), Fixed Term Loans (installment-based products), and Short-term Agricultural/Micro-Credit. Each structure determines repayment behavior, classification timelines, and borrowing costs differently. Understanding these classifications protects your credit score and financial health.
That Sinking Feeling When “Loan” Stops Being Just a Word
The moment it gets real
You need money urgently, but every Google search gives conflicting advice. Friends share horror stories of hidden fees and ballooning interest rates. The fear isn’t borrowing itself, it’s borrowing the wrong way forever.
My neighbor Kamal, a garment factory supervisor earning 65,000 taka monthly, spent three weeks researching loans for his daughter’s university admission. He read dozens of articles. Watched YouTube videos. Called five different banks. And still felt more confused than when he started.
What nobody tells you about Bangladesh’s loan landscape right now
Over 35% of loans turned into NPLs by late 2024, meaning wrong choices hurt real families, not just banking statistics. Banks tightened eligibility after the classified loan crisis, making approvals harder for everyone. Bangladesh Bank’s shifting interest rate policies mean yesterday’s advice doesn’t work today.
Here’s what changed: a loan that seemed affordable six months ago now carries different provisioning requirements, different classification timelines, and different consequences for your Credit Information Bureau report.
The stakes got higher while the guidance stayed vague.
The central confusion that traps everyone
Articles list loan names but skip how repayment actually behaves daily. You don’t just need a loan, you need the right account structure. There’s a massive difference between a loan product name (personal loan, auto loan, home loan) and the underlying loan account classification (continuous, demand, term) that Bangladesh Bank uses to determine when your account becomes Sub-standard or Doubtful.
That confusion costs people lakhs in unnecessary interest and years of credit score damage.
The First Big Fork: Secured vs Unsecured (Understanding the Safety Trade-off)
When you bring something to the table
You pledge collateral like property, FDR, or gold worth 100% of the loan amount. Banks reward this “backup plan” with lower rates, often 9-12% in Bangladesh right now. Missing payments means losing the asset, that’s the honest bargain here.
My cousin Rashed needed 15 lakh taka for his electronics shop expansion. He pledged his father’s land as security and got a 10.5% interest rate from BRAC Bank. Without that land, the same loan would’ve cost him 16%.
That 5.5% difference meant paying 4.8 lakh taka less over five years. But here’s what nobody told him initially: if his shop failed and he couldn’t repay, his family would lose that land. Not in some abstract future, but through actual legal proceedings that take 6-12 months.
When it’s just your word and paycheck
No collateral needed, but banks scrutinize your income and CIB score hard. Interest rates typically 12-18%, reflecting the lender’s higher risk exposure. Your salary slip, job tenure, and existing debt burden ratio become everything.
Nabila, a software engineer at a multinational in Gulshan, got approved for an unsecured personal loan of 8 lakh taka within five days. Clean CIB, three years with the same employer, monthly salary 95,000 taka. The bank didn’t need her apartment or savings as backup.
But she paid 15.5% interest because the bank took all the risk.
| Aspect | Secured Loan | Unsecured Loan |
|---|---|---|
| Collateral Required | Yes (property, FDR, gold) | No |
| Interest Rate Range | 9-12% | 12-18% |
| Typical Max Amount | Up to 70% of asset value | Tk 10-20 lakh typically |
| Approval Timeline | 2-4 weeks (valuation needed) | 3-7 days |
| Risk to Borrower | Lose pledged asset if default | CIB damage, legal action |
The question that decides everything
Can you afford to lose the collateral if life throws curveballs? If losing it means homelessness or business death, choose unsecured despite the higher cost. Lower interest saves money only if you’re confident about repayment capacity.
Think about it this way: paying 3-5% more in interest hurts your wallet. Losing your family home or ancestral land destroys your life.
How Repayment Actually Behaves: The Structure That Controls Your Life
Term loans: the predictable path most people understand
You get a lump sum, then repay in equal EMIs monthly. Like rent, same date every month, same amount. Suits one-time needs like weddings, medical procedures, vehicle purchases perfectly.
My brother-in-law Fahim took a term loan of 12 lakh taka for his daughter’s wedding in February 2024. Every month, 28,450 taka gets deducted automatically from his salary account on the 5th. He knows exactly what’s coming. No surprises. No calculations. Just one fixed obligation for the next 60 months.
But here’s the brutal part: miss even one payment and it’s flagged “past due” immediately in Bangladesh. After 90 days overdue, your entire loan gets classified as Sub-Standard under Bangladesh Bank’s Master Circular on Loan Classification. That classification triggers higher provisioning requirements for the bank and serious damage to your credit report.
Continuous loans: the flexible friend that can become a trap
Cash Credit and Overdraft let you borrow, repay, re-borrow within a set limit. Interest charged only on daily outstanding balance, not the full limit amount. Perfect for business cash flow gaps, dangerous for lifestyle spending.
Arif runs a printing press in Tejgaon. He has a 20 lakh taka Cash Credit facility from City Bank. Some months he uses 18 lakh when big orders come in. Other months he uses only 5 lakh. Interest calculation happens daily on whatever amount he’s actually using.
This flexibility saved his business during slow months. But here’s the trap: these accounts must be fully adjusted by the expiry date or they become overdue instantly. Not in 90 days. Instantly. And because you can keep borrowing and repaying, it’s psychologically easy to treat it like free money instead of debt.
Demand loans: money the bank can call anytime
The bank demands full repayment whenever they choose, without advance notice required. Common in trade finance: Post Import, Payment Against Documents, Bill Purchase. Unless you’re importing or exporting, you probably won’t encounter these as a retail borrower.
These exist in a different universe from personal finance. They’re tools for businesses moving goods across borders, managing Letter of Credit transactions, handling foreign exchange exposure.
The comparison that ends arguments
| Loan Structure | Best For | Repayment Style | Interest Calculation | Risk Level |
|---|---|---|---|---|
| Term/Installment | One-time purchases | Fixed monthly EMI | On full amount from day one | Low stress, predictable |
| Continuous/Revolving | Fluctuating business needs | Flexible draw and repay | Daily balance only | High if misused |
| Demand | Trade finance, L/C transactions | On bank’s demand | Varies by agreement | Very high uncertainty |
Purpose-Based Loan Accounts You’ll Actually Encounter in Bangladesh
Home loans: building your fortress or your burden
Mortgage loans run 10-25 years, making big purchases possible through small payments. Banks typically finance 50-70% of property value under Bangladesh Bank’s Consumer Financing Guidelines, requiring substantial down payment from you.
Tanvir and his wife spent eight months saving for their down payment on a flat in Bashundhara. The property cost 85 lakh taka. Standard Chartered approved financing for 60 lakh, but they needed to bring 25 lakh cash upfront. At 11.25% interest over 20 years, their monthly EMI settled at 62,750 taka.
Here’s what shocked them: an interest rate difference of just 1% means paying an extra 12 lakh taka over the loan’s life. That’s an entire year of their combined salaries vanishing into interest calculations.
Choose fixed rates for peace of mind versus variable rates that gamble on market movements you can’t control.
Personal loans: the quick-cash solution with premium pricing
Any-Purpose loans from HSBC, City Bank, BRAC up to Tk 20 lakh. No questions on usage, approval within days for salaried professionals. Higher rates reflect the bank’s risk, often 14-17% depending on your profile and employment stability.
Sultana needed 6 lakh taka when her mother required emergency cardiac surgery. Her provident fund wouldn’t mature for another year. Her savings covered only 2 lakh. Dutch-Bangla Bank approved her personal loan in 72 hours because she had seven years’ tenure at her pharmaceutical company and a spotless CIB.
She paid 16.5% interest, which felt painful. But the alternative was delaying life-saving treatment or borrowing from relatives at emotional interest rates that never truly get repaid.
Perfect for emergencies, terrible for impulse purchases or depreciating gadgets like the latest iPhone that loses half its value in 18 months.
Auto loans: financing your ride while it loses value
Secured against the vehicle itself, rates around 10-14% for 3-7 year tenures. Like pouring water into a bucket with a hole, your car loses value immediately while interest compounds monthly.
Imran financed a 2022 Toyota Fielder through Jamuna Bank at 12.75% over five years. The car’s surveyed value was 28 lakh taka. The bank financed 80%, requiring him to pay 5.6 lakh down. His EMI: 50,890 taka monthly.
Here’s the depressing math: after three years of payments, he’ll have paid back nearly 18.3 lakh taka total (principal plus interest), but the car’s market value will have dropped to around 18 lakh. He’s essentially breaking even on an asset that keeps depreciating.
Used car financing is even stricter, often covering only 50% of surveyed value because depreciation accelerates on older vehicles.
SME and business loans: fuel for growth, not lifestyle
Cash Credit and Overdraft facilities manage daily working capital fluctuations brilliantly. Term loans fund machinery, expansion, factory space with 1-5 year tenures. Bangladesh Bank offers special rates for women entrepreneurs, CMSMEs, and agricultural sectors through targeted refinancing schemes.
Farzana runs a boutique fashion house in Dhanmondi. She got a 15 lakh taka CMSME term loan at 9% to buy industrial sewing machines and expand her workshop. The subsidized rate came from Bangladesh Bank’s special women entrepreneur program.
But here’s the wisdom her accountant shared: never mix personal and business borrowing. When you blur those lines, you destroy both. Your business cash flow becomes hostage to personal spending habits, and your personal financial health depends on business volatility you can’t always control.
Bangladesh-Specific Classifications That Confuse Everyone
Continuous loans: the “running” account reality
Bangladesh Bank’s official category includes Cash Credit and Overdraft facilities. Allows transactions within limit until expiry date, then renewal required. According to BRPD Circular No. 15/2024, these must be adjusted or they become overdue instantly, not after any grace period.
Think of it like a running tab at your neighborhood tea stall. You can buy tea, pay off some balance, buy more tea, pay again. But at month’s end, you settle up completely or the stall owner gets upset.
Jahangir’s printing business has a 30 lakh taka overdraft facility expiring December 31st every year. By December 30th, he must either pay the entire outstanding balance to zero or get the facility renewed for another year. Miss that deadline, and Bangladesh Bank classifies his entire outstanding amount as overdue immediately.
Demand loans: repayable when bank demands
These become repayable “on demand” by the bank without requiring advance notice. Linked to trade finance instruments, forced loans, L/C-backed facilities. Retail borrowers rarely see true demand loans outside import or export activities.
When Rezaul imported construction materials through a Letter of Credit, the bank issued a demand loan against those shipping documents. The moment his goods cleared customs and he could sell them, the bank demanded repayment. No 30-day grace period. No negotiation.
This structure makes sense for trade finance because the goods themselves generate the cash to repay the loan within days or weeks.
Fixed-term loans: structured installments everyone recognizes
Set tenor with installment schedule fixed at disbursement day itself. Most common for personal, auto, education, home loans in Bangladesh. Under Bangladesh Bank regulations: 3 months overdue equals Sub-Standard classification, 6 months equals Doubtful, 12 months equals Bad or Loss status.
This is what 95% of individual borrowers actually deal with. You know your EMI amount, you know your payment date, you know exactly when the loan ends.
Shahin took a 5 lakh taka personal loan on March 15, 2024, with 36 monthly installments of 16,780 taka. His schedule shows every single payment date through March 15, 2027. No ambiguity. No recalculation unless he prepays or restructures.
Agricultural credit: the specialized short-term category
Separate Bangladesh Bank classification for farming credits under 12 months. Lower provisioning requirements (0.50% versus 1% for other loans) show government priority for the agricultural sector and recognition of seasonal cash flow patterns.
My uncle farms rice in Bogra. Every year he takes a 3 lakh taka agricultural loan in April for seeds, fertilizer, and labor. By December after harvest, he repays the full amount. This cycle repeats annually because farming doesn’t generate monthly income like a salary job.
Bangladesh Bank treats these differently because agricultural income is inherently seasonal and weather-dependent. A clothing factory can adjust production monthly. A rice farmer cannot.
The Price Tag You Feel Later: Interest, Fees, and Hidden Costs
Why rates feel unfair but aren’t random
Unsecured borrowing costs more because the lender takes a bigger gamble on you. Your CIB score, job stability, and debt burden ratio all factor into your personal rate. Banks use sophisticated models that calculate default probability based on hundreds of data points.
When Shafiq applied for a personal loan, City Bank’s algorithm saw: 42 years old, same employer for 11 years, owns his apartment, CIB score 780, existing home loan with perfect 4-year payment history, monthly salary 1.2 lakh with 35% going to current EMI. The system approved him at 13.5% because statistically, people matching his profile default less than 2% of the time.
His colleague Rahat, same salary, got quoted 17.5% because he’d changed jobs three times in five years and had a credit card that went 60 days past due in 2023. Different risk profile, different price.
The slow-drip stress of revolving credit habits
Overdrafts calculate interest daily or weekly on a compounding basis, not simple interest. Using OD like a long-term loan snowballs costs dramatically within months. Making only minimum payments on revolving credit keeps you trapped forever.
Bilkis has a 5 lakh taka overdraft at 15% annual interest. She keeps 4 lakh outstanding constantly, thinking she’s only paying 15%. But the daily compounding means she’s actually paying 16.2% effective annual rate. Over a year, that extra 1.2% costs her an additional 4,800 taka she didn’t budget for.
Worse, because she can keep drawing and repaying, she’s paid 60,000 taka in interest over 12 months while the principal balance barely moved. The flexibility became a psychological trap.
Processing fees, stamp duties, and exit barriers
Banks charge 0.5-2% processing fee just to evaluate your application, whether they approve you or not. Government stamp duties and legal verification add thousands more upfront. Prepayment penalties punish you for paying off debt early, so negotiate this clause before signing.
Mamun borrowed 10 lakh taka for his restaurant. The bank charged: 1.5% processing fee (15,000 taka), 5,000 taka for legal verification, 3,200 taka in stamp duties. He paid 23,200 taka before receiving a single taka of the loan.
Then he discovered the prepayment penalty: if he paid off the loan within three years, the bank would charge 3% of the outstanding balance. So paying early to save interest would actually cost him 30,000 taka. These “small” fees can add 3-5% to total borrowing cost over the loan’s life.
Reality check: the NPL crisis affects you directly
With 35% plus NPLs reported by end of 2024, banks tightened every approval criterion. Collection pressure increased, making missed payments more painful than before. Your loan behavior affects Bangladesh’s banking stability, and vice versa.
Banks started verifying employment more strictly. Rejecting applications from industries with high default rates. Requiring larger down payments. Calling references aggressively. The systemic risk created individual consequences.
How Your Loan Accounts Look to Lenders and CIB
The credit report logic nobody explains clearly
Every loan account type reports differently to Credit Information Bureau. Revolving accounts track utilization percentage, not just payment history alone. Installment accounts measure on-time payments over fixed term commitment.
Think of CIB like a permanent academic transcript that never gets erased. That credit card you maxed out in 2021? Still there. That personal loan you paid off flawlessly in 2023? Still there, but helping you now.
Taslima’s CIB report shows: one home loan (18 months perfect payment history), one auto loan (completed and closed last year with zero late payments), two credit cards (28% and 15% utilization), one personal loan (current, 6 months perfect). Lenders see someone who borrows responsibly, maintains multiple account types without stress, and closes loans successfully.
The silent questions lenders ask about your behavior
Do you borrow to build assets or survive month-to-month? Do you finish loans cleanly or keep rolling balances forward endlessly? How many active loan accounts do you maintain simultaneously right now?
These patterns reveal more than your salary ever could. Someone earning 80,000 taka with one well-managed home loan looks more creditworthy than someone earning 1.5 lakh with six maxed-out credit cards and three overlapping personal loans.
The behavior signals risk tolerance, financial discipline, and future capacity.
The clean habits that protect your future borrowing power
Pay on time even when it’s annoying, because the 90-day threshold classification destroys you instantly. Keep revolving credit usage below 30% of your limit to signal control and restraint. Mix installment and revolving accounts carefully to build a strong, diverse credit profile.
Set automatic payments. Build a 3-month emergency buffer. Track every due date in your phone calendar with 5-day advance reminders.
These tiny habits compound into enormous financial credibility over years.
Islamic Banking Alternatives: Profit-Sharing Instead of Interest
Understanding the philosophical difference
Money cannot breed more money directly under Shariah principles. The bank becomes a partner, buyer, or lessor instead of a traditional lender. Risk-sharing principle means the bank shares your project’s success or failure, not just collecting interest regardless of outcome.
As an Islamic finance scholar explained to me: “Interest punishes regardless of outcome. You lose your business, you still owe interest. Profit-sharing aligns incentives because the bank succeeds only when you succeed.”
This philosophical shift creates fundamentally different loan structures and relationships.
Murabaha: the cost-plus financing model
The bank buys the asset (car, home, equipment) and sells it to you at a markup. You know the exact total cost upfront, and it never changes with market fluctuations. Popular for vehicle and home financing through Islami Bank, Social Islami Bank, and First Security Islami Bank.
Khalid wanted to buy a Toyota Corolla worth 32 lakh taka through Islamic financing. Social Islami Bank bought the car from the dealer for 32 lakh, then sold it to Khalid for 41.6 lakh payable over 48 months. His monthly payment: 86,667 taka.
The 9.6 lakh markup is profit, not interest. It’s fixed at the contract’s start. Even if market rates jump to 20%, Khalid’s payment never changes because the sale price was agreed upfront.
Ijara: the leasing approach
Similar to a rental agreement where you pay rent for using the asset. Ownership typically transfers at the end of the lease period after the final payment. Works well for heavy equipment, vehicles, and machinery procurement needs.
Farhana’s pharmaceutical company needed laboratory equipment worth 45 lakh taka. Islami Bank purchased the equipment and leased it to her company for 60 months at 98,000 taka monthly rental. After 60 payments (totaling 58.8 lakh), ownership transfers to her company.
The structure resembles renting with an ownership endgame. Shariah-compliant because the bank owns the asset and bears ownership risks during the lease period.
Choosing the Right Loan Account Without Regret
Start with your true need, not the tempting limit
One-time purchase like a wedding or medical procedure fits term or installment structure perfectly. Emergency buffer or seasonal business needs fit overdraft or revolving facility. Long-term asset building like property requires a secured mortgage with patience and discipline.
Don’t borrow 12 lakh just because the bank approved you for 12 lakh. Borrow the 7 lakh you actually need. The remaining 5 lakh isn’t “free money” or “opportunity,” it’s debt you’ll pay interest on for years.
Match account structure to your personality honestly
Hate tracking details constantly? Choose fixed installments for fewer daily surprises and automatic peace of mind. Irregular income from freelancing or seasonal business? Pick flexibility but add strict personal rules upfront that you’ll actually follow.
Impulsive spender who justifies purchases emotionally? Avoid revolving credit completely. It will hurt you. The flexibility will become a trap. You’ll convince yourself that “just this once” won’t matter, and six months later you’ll wonder how you owe 8 lakh taka.
Know yourself. Then choose the structure that works with your psychology, not against it.
The three questions to ask before signing anything
“Is this continuous, demand, or term, and what triggers Sub-Standard classification?” The officer should answer clearly: term loan becomes Sub-standard at 3 months overdue, continuous loan becomes overdue instantly at expiry.
“Show me total cost: all fees, penalties, and interest calculation method.” Not just the EMI amount. The processing fee, stamp duty, legal charges, prepayment penalty, late payment charges, everything.
“What happens if I miss one payment, step by step?” Walk through the timeline. 30 days past due, what happens? 60 days? 90 days? When does CIB reporting change? When do collection calls start?
If the banker avoids details or gets vague or says “don’t worry about that,” walk away immediately. That vagueness will cost you lakhs.
Conclusion
You don’t just choose a loan, you choose a loan account behavior that shapes your daily stress level for months or years ahead. Secured or unsecured decides the risk-reward balance you’re comfortable living with. Term or revolving decides whether you face predictable installments or flexible temptation. And in Bangladesh, understanding classifications like Continuous Loan, Cash Credit, Overdraft, and how Bangladesh Bank’s BRPD Circular No. 15/2024 categorizes these prevents nasty surprises when banks suddenly tighten rules or demand adjustments.
The NPL crisis taught us that wrong borrowing choices hurt everyone, from individual families to national banking stability. Your first step today is beautifully simple: take any existing loan document or bank app screenshot and label it in one clear sentence. “Secured or unsecured? Term or revolving? When does it become classified?” Once you can name what you’re dealing with, you can control it. And that control transforms money fear into the kind of calm confidence that lets you build the life you actually want.
Types of Loans and Advances in Banking (FAQs)
What are the 4 main types of loan accounts in Bangladesh?
Yes, Bangladesh Bank recognizes four: Continuous Loans (Cash Credit, Overdraft with flexible draw-and-repay), Demand Loans (trade finance, repayable on bank’s demand), Fixed Term Loans (installment-based personal, auto, home loans), and Short-term Agricultural Credit (seasonal farming loans under 12 months).
How does Bangladesh Bank classify loan accounts?
Yes, through BRPD Circular No. 15/2024. Loans move from Standard to Special Mention Account at 90 days overdue, Sub-standard at 3 months, Doubtful at 6 months, Bad or Loss at 12 months. Each classification triggers higher provisioning requirements and damages your CIB report.
What is the difference between continuous and demand loans?
Continuous loans let you borrow, repay, and re-borrow within a limit until expiry, with interest on daily balance only. Demand loans become repayable instantly when the bank demands, typically for trade finance. Continuous suits working capital needs, demand suits import or export transactions.
When does a loan become classified as Sub-standard or Doubtful?
Term loans become Sub-standard at 3 months (90 days) overdue, Doubtful at 6 months. Continuous loans become overdue instantly at expiry if not adjusted or renewed. Sub-standard classification means 20% provisioning, Doubtful means 50%, seriously damaging your credit score and future borrowing capacity.
How do loan account types affect interest rates and repayment?
Secured loans cost 9-12% versus unsecured at 12-18% because collateral reduces bank risk. Term loans charge interest on full amount from disbursement, continuous loans only on utilized daily balance. Revolving structures offer flexibility but compound interest daily, often costing 1-2% more effective annual rate than advertised.