6 Different Types of Loans You Should Really Know About

In a perfect world, consumers would have enough money to pay for everything in cash.

But that’s not often the case, especially for large purchases, like homes and cars.

This is where consumer loans come in. Loans give you the money you need for a variety of purposes.

The different types of loans that you use depend on your needs. Some loans, such as mortgages and auto loans, help you buy something specific over time. Other loans make you money and have more flexible uses.

Check out these six types of loans.

1. Mortgage

Mortgages allow consumers to finance homes. Home purchases are often financed, with 86% of buyers financing according to one report.

Mortgages require a down payment. The most common option is a fixed payment loan where you will pay the same amount over the life of the loan.

2. Home equity loan

If you own your home, you may be eligible for a home equity loan. You borrow against the equity in your home. The amount you can borrow depends on the amount of equity you have.

Your home serves as collateral for the loan. This means that you could potentially lose your home if you cannot make the loan repayments.

3. Secured personal loan

The money you get from a personal loan can usually be used for anything. With a secured personal loan, you put something as collateral. If you default on the loan, the lender has collateral to collect.

You will often get better interest rates on a secured personal loan since the lender holds the collateral. Just make sure you can repay the loan, or you risk losing the property you are using as collateral.

4. Unsecured personal loan

An unsecured personal loan also gives you money that you can use as you wish. The difference with this guy is that you don’t put any guarantees.

Since you don’t put any collateral, lenders are often more stringent in their requirements. Your credit score will be a major factor in the terms that you will get on the unsecured loan.

If you have bad credit, it can be difficult to get an unsecured loan. If you qualify, you will likely pay more interest.

5. Cash loan

Cash loans, sometimes called payday loans, are short term loans.

When you get a loan of money, you generally repay it over a shorter period than a personal loan. They generally concern amounts lower than those of other types of loans.

Cash loans are best for emergencies when you need money quickly. They generally have much more flexible requirements than traditional loans. You can get the money quickly due to the short application process.

Check the interest rates and fees before making this type of loan.

6. Title loan

Car owners can get a title loan. Securities loans are generally short term loans with high interest rates, so use this option with care. If you do not reimburse it within the time limit, your car will be taken back as it serves as a guarantee.

Understanding the types of loans

When you need cash, it is important to understand the types of loans available. Choose the option that saves you the most in financing costs and that suits your situation.

Explore our archives to get more useful information for your life.

About Walter J. Leslie

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