What kind of loans do institutional lenders typically provide?

Institutional lenders, such as banks and credit unions, typically provide government-backed loans because these types of loans are designed to reduce the risk for lenders while making financing more accessible for borrowers. Government-backed loans include options like FHA (Federal Housing Administration) loans, VA (Veterans Affairs) loans, and USDA (United States Department of Agriculture) loans. These programs guarantee part of the loan, which means that in the event of borrower default, the government repays the lender, thus encouraging lending to individuals who might not qualify for traditional financing due to lower credit scores or lack of a significant down payment.

The other types of loans mentioned, such as unregulated personal loans, are usually not offered by institutional lenders because they do not have the same guarantees or regulatory frameworks. Additionally, while some lenders may charge high-interest rates, institutional lenders typically offer competitive rates, especially on government-backed loans, which benefit from the government's backing. Peer-to-peer loans are mainly facilitated through online platforms where individual investors fund the loan requests, differing from the traditional institutions that are more heavily involved in government-backed lending.