6 Types of Loans That You Need to Know

6 types of Loans
There are different types of loans offered by lending companies. But it’s important to understand your options to determine which one best suits your needs. There are generally two types of loans: secured and unsecured loans. 

Secured loans require collateral. In case you could not afford to pay for these loans, the property that you used as collateral will be given to the lender.

Unsecured loans on the other hand do not require any collateral.

However, because of the risks involved, unsecured loans usually have higher interest rates and the maximum amount lend is often smaller. 

Here are the different types of secured and unsecured loans that you could get:

Home Loan
Home Loans
A home loan is also called a mortgage. If you decide to purchase a house, but don’t have the money to pay for its total cost, you may consider applying for a home loan. The lender will give you the amount you need for buying the house. You will then pay the amount you borrowed, plus the interest rate, on a monthly basis that would last for a specific period depending on the mortgage contract. If you were not able to pay for the loan, the lender could get the ownership of the property. 

Auto Loan
Auto Loans
While home loans would help you get your own house, auto loans, as the term suggests, would help you get a vehicle, which amount you can’t pay upfront. This is also a secured loan, as the car would be pulled out by the lender if you can no longer continue with the payment. You would also be paying monthly for a certain period until the entire loan has been paid.

Business Loan
Business Loans
If you wish to start a small business, you may use your personal savings. However, if the amount you saved is not enough, you may consider getting a business loan. The amount that lending companies offer varies and it also depends on various factors, including the credibility of the borrower to pay for the loan.

Student Loan
Student Loans
Students who need financial assistance with their education may consider getting a student loan. The principal amount, plus the interest would be paid back to the lender. A cosigner with a good credit history usually signs the contract together with the principal borrower. This cosigner agrees to pay the loan in case the borrower cannot continue to pay for it.

Payday or Emergency Loan
Payday Loans
This type of loan is a quick loan that is meant to be repaid on the next pay out. This is a short-term credit that you may consider in case there are emergency expenses or you were short of cash and payday is still a few weeks or days away. The amount may be automatically deducted from your bank account on your payday. Interest rate is typically higher on this type of loan.

Personal Loan
Personal Loans
You can get this loan for whatever purpose you may have. It can be secured or unsecured. If it’s secured, there’s the collateral that the lender could get from you if you default on your payment. Unsecured personal loans on the other hand have higher interest rates.

Consider your options before applying for a loan and make sure you read the terms and conditions to ensure that you understand the risks.

This is a sponsored post.


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