6 Types Of Loans You’ll Need To Take Out During Your Lifetime
Are you wondering which loans are available to you for borrowing?
At some point, you may need to acquire loans for large purchases, debt consolidation loans, personal expense loans, college education loans, and much more. Therefore, you should get a good understanding of the types of loans accessible to you alongside their terms and conditions.
Here are six loans you’ll need to take out during your lifetime and what each one covers:
1. Personal Loans
Personal loans are the most versatile type of loan in the lending market today. You can use them for just about anything: medical emergencies, home renovations, debt consolidations, vacations, weddings, and credit building.
Personal loans are installment loans; when you borrow a fixed amount of money from the lender, you’ll repay it monthly plus interest over the life of the loan. Payment terms of personal loans vary from person to person as well as with the lender.
Your credit rating and the amount you intend to loan will also impact the terms of your loan. For instance, you’ll get higher interest rates if you take out a small amount of a personal loan or if you have a poor credit rating.
Depending on the lender, personal loans can either be secured or unsecured. With a secured personal loan, you’ll need to put something up as collateral. For an unsecured personal loan, you don’t put up any collateral. Secured types of loans have better rates compared to unsecured loans.
2. Small Business Loans
Business owners use these loans to finance their business operations. You may use the loan to cover short-term expenses, scale your business or even purchase a business entity. The purpose of this loan is to bring entrepreneurs closer to their goals.
Loan amounts and terms of business loans depend on the type of small business loan you wish to get. Compared to personal loans, business loans have more qualification requirements. Hence, to get a small business loan from your lender, you’ll need to know your requirements, have a good credit score, have a business plan, and provide collateral (if need be).
Some small business loans you can take out include:
● Small business line of credit
● Accounts receivable financing
● Working capital loans
● Small business term loans
● SBA small business loans
● Equipment loans
● Small business credit cards
Lenders for small business loans include online lenders, commercial banks, peer-to-peer lending sites, and community banks.
3. Auto Loans
Buying a vehicle is a large purchase, and in many instances, vehicle buyers need financial aid to help them make their purchase. You can use an auto loan to purchase either new or used vehicles.
Auto loans have larger down payments and short payment term lengths compared to most loans because vehicle value depreciates over time. Its term lengths range from about a year to three years. Like most loans, you can either get a secured auto loan or an unsecured auto loan.
For a secured auto loan, you’ll need to put up collateral (in most cases, it is the vehicle you are buying). With an unsecured auto loan, you need not put up collateral (all you need in many cases is a good credit score). You can get auto loans from credit unions, vehicle dealerships, banks, and online lenders. All you need to do to get the loan is to :
● Determine whether you want a new or used vehicle
● Decide how much you want to spend
● Check your credit score
● Fill out your loan application
● Get pre-approved
● Get a co-signer if need be
● Select your vehicle of choice
With the right auto loan and payment plan, you won’t have to break your back to get that vehicle of your dreams.
4. Student Loans
Student loans are another popular type of loan popular. Students apply for these loans to sort different aspects of their school life; fees, tuition, and living expenses. The types of student loans are federal and private student loans. Most students opt for federal student loans because they have fixed interest rates and can be repaid shortly after graduation.
With federal student loans, you can either get a subsidized student loan or an unsubsidized student loan. Subsidized loans are designed for students with high financial needs, while unsubsidized loans can be allocated to any student regardless of their financial status.
If you don’t qualify for a federal loan, you can always opt for a private student loan. Even though private student loans often offer lower interest rates (depending on one’s financial situation) than federal student loans, you’ll need to have a good credit history to qualify. Limits on private student loans vary from one lender to the other.
Before you get this loan, you need to understand more about student loans comprehensively.
5. Debt Consolidation Loans
Debt consolidation loans will help you to settle your other debts. This loan rolls multiple debts (usually high interest) into a single payment. Therefore, if you borrow a debt consolidation loan successfully, you’ll repay your debts as a single payment monthly.
It’s always a good idea to get a debt consolidation loan if you can get lower interest rates.
This will help reduce your debt amount as well as hasten your loan settling period. You can get a consolidation loan if you have; a huge debt, a good credit score, enough income to service the debt monthly
However, debt consolidation loans are not always a magical solution to your debt issues. You may run into deeper problems like added costs, increased interest rates, eventual overpayment of interest, and missed payments. It may even hinder you from solving your underlying financial issues and encourage overspending.
Therefore take caution before borrowing.
6. Mortgage Loans
A mortgage is a secured loan that you can use to finance a property. If you want to buy a home but cannot pay the total amount upfront, consider applying for a mortgage loan. This loan will spread out your payment settlements over many years.
Collateral for mortgage loans is the home itself. Hence, if you default on payment, the lender can repossess the house.
Apply for Different Types of Loans Today
If you need a loan to keep everything in check, it is key that you understand the types of loans available to you; personal loans, small business loans, auto loans, student loans, debt consolidation loans, and all their terms and conditions.
If you need a quick loan now, contact us and we’ll get back to you in the shortest time possible.