The modern consumer has more borrowing options than ever in the past. Some loans are more general in purpose, and others might be targeted at specific circumstances.
It can be so much that it might be hard to find the right loan for your needs. If you pick the wrong loan, it could end up costing you more than it needs to. In some situations, selecting the wrong loan might even result in trouble paying it back.
Check out this list to learn about some of the types of loans every person should know about.
This is what most people think of when it comes to bank loans. The borrower goes to the bank, applies for the loan, and they get a lump sum. These loans can be used for an array of personal needs and usually have terms of a year to five years.
A mortgage loan is the type of loan most people use when buying a house. You also have many different types of mortgage loans. Different mortgage programs can offer different terms and benefits to the borrower. Most mortgages are around 25-30 years.
People may also take out student loans to pay for their education. Student loans can pay for tuition and various related expenses at accredited institutions. Student borrowers may have options to choose between federal student loans and private loans. Both have their pros and cons, and the right choice will depend on the individual.
Most people can’t afford to pay the entire cost of a vehicle when they buy one. For this reason, auto loans are one of the most common types of loans. You might be able to get them from a bank or credit union. Many car dealers also offer loans to buyers. The loan is secured by the automobile, so it can be repossessed if the borrower fails to pay.
Home Equity Loans
If you own a home and have it most or all the way paid off, a home equity loan can be a good option. Basically, a home equity loan involves borrowing against the portion of your home you own. These loans can be advantageous because they usually have low interest rates since the house is used as collateral. A similar alternative is a home equity line of credit.
A cash advance is a short-term loan that offers fast cash. You can find services that offer cash advances. If you have a credit card, most cards have a cash advance feature. You just take the card to an ATM and withdraw cash instead of using it to make a purchase directly. The ability to access cash in a hurry is an advantage, but it is usually an expensive way to borrow money.
A payday loan is another type of short-term loan. As the name suggests, the term usually lasts until the borrower’s next paycheck. This is viewed as a form of predatory lending by many. First, they usually target people living paycheck to paycheck. They also come with high interest rates and fees. Many of these loans are also engineered in a way that keeps borrowers trapped in a cycle of debt.
A reverse mortgage is a type of home equity loan. Borrowers can be eligible for a reverse mortgage if they own their home and are 62 or older. What makes these loans advantageous is that they do not need to be paid back until the borrower either dies or sells the home. A borrower can see how much they can get by using a reverse mortgage calculator (https://reverse.mortgage/calculator).
People with high debt levels can benefit from debt consolidation loans. If you have a lot of credit card debt or high-interest loans, debt consolidation can be a way to make it more manageable. First, it takes all the various debts and rolls them into one loan. Along with that, the borrower might be able to qualify for lower interest or lower payments.
A title loan involves putting the title for a car up as collateral on the loan. These are usually short-term loans that offer fast cash. Title loans are another type of loan that many consider predatory in nature. The interest rates are high, and they often come with hidden fees. The lender will usually only offer a fraction of the vehicle’s value on the loan as well.
Home Improvement Loans
The intention of home improvement loans is to help homeowners finance repairs and upgrades to their homes. It could be used for everything from remodeling your kitchen to replacing your roof. Home improvement loans can vary depending on where you go and your circumstances. Some might be secured loans, and others might be unsecured. You can also find home improvement loans with varying terms.
Beyond selecting the right type of loan, you should compare offerings from different lenders. The terms of loans in the same category can vary significantly from one lender to the next. With a little comparison shopping, you could save a lot of money and avoid loans that have unfavorable term