Whenever you decide to borrow money make sure you understand the agreement fully. Know what type of loan you’re receiving and whether it is tied to any of your belongings.Familiarize yourself with your repayment terms. There is a guideline to common type of loans that will help you.
Types of Loans
Loan types vary because each loan has a specific intended use. They can vary by length of time, how interest rates are calculated, when payments are due andnumber of other variables.
Student loans are for students who need assistance with their tuition, learning materials, and living expenses. It is offered to college students and their families to help cover the cost of higher education. There are two main types:
- Federal student loans.
Private student loans.
Federally funded loans are better, as they typically come with lower interest rates and more borrower-friendly repayment terms. Before you sign up for any student loans, be responsible. Find out what your expected monthly payments will be with a Student Loan Payment Amount Estimator.
A home is the largest purchase you’ll ever make. In everyone’s life buying a home is a costly affair. Different home loans offered
- Land purchase Loan
- Home Purchase Loan
- Home construction Loan
- Home Improvement Loan
- Home Extension Loan
- Home conversion Loan
Auto loans are tied to your property. They can help you afford a vehicle, but you risk losing the car if you miss payments. This type of loan may be distributed by a bank or by the car dealership directly but you should understand that while loans from the dealership may be more convenient, they often carry higher interest rates and ultimately cost more overall.
Personal loans can be used for any personal expenses and don’t have a designated purpose. This makes them an attractive option for people with outstanding debts, such as credit card debt, who want to reduce their interest rates by transferring balances. Like other loans, personal loan terms depend on your credit history.
Small Business Loans
Small business loans are granted to entrepreneurs to help them start or expand a business. This offers a variety of options depending on each business’s needs.
Borrowing from Retirement & Life Insurance
Those with retirement funds or life insurance plans may be eligible to borrow from their accounts. This option has the benefit that you are borrowing from yourself, making repayment much easier and less stressful. However, failing to repay such a loan can result in severe tax consequences.
A consolidated loan is meant to simplify your finances. Simply put, a consolidate loan pays off all or several of your outstanding debts, particularly credit card debt. It means fewer monthly payments and lower interest rates.
Borrowing from Friends and Family
Borrowing money from friends and relatives is an informal type of loan. This isn’t always a good option, as it may strain a relationship. To protect both parties, it’s a good idea to sign a basic promissory note.
A cash advance is a short-term loan against your credit card. Instead of using the credit card to make a purchase or pay for a service, you bring it to a bank or ATM and receive cash to be used for whatever purpose you need. Cash advances also are available by writing a check to payday lenders.
Home Equity Loans
If you have equity in your home – the house is worth more than you owe on it – you can use that equity to help pay for big projects. Home equity loans are good for renovating the house, consolidating credit card debt, major medical bills, education expenses paying off student loans, retirement income supplements. They must be repaid in full if the home is sold. Types of home equity loans
- Home equity loans
- Home equity lines of credit (HELOCs)
Use the borrower’s home as a source of collateral so interest rates are considerably lower than credit cards. The major difference between the two is that a home equity loan has a fixed interest rate and regular monthly payments are expected, while a HELOC has variable rates and offers a flexible payment schedule.