When searching for a loan, which loan is right for you? According to Merriam-Webster.com, a loan is money lent at interest. With that said, a loan is simply a larger amount of debt. Think of it as the lender being the credit card, only they (the banker) have given you a huge cash advance that will have interest applied based on your financial situation. A lender (generally a bank) will give you the funds you need when purchasing something that is of value to you. With so many different types of loans, which loans will you need and what steps need to be taken to get the loan? In this article, I will define 4 types of loans and explain what they are used for.
Types of Loans Available: (all information can be viewed online through Yahoo or Google by searching keywords like loan, personal, unsecured loan or even debt loan)
*Bank of America, LendingTree, Union Bank of California and Chase are some companies who have loans available. All loans can be viewed online, however I do suggest going directly to the financial institution and speaking with a customer representative who can give a better explanation of details. It’s one thing to research online; it’s another when you have direct communication with a person who has expertise in the topic.
There are unsecured and secured loans. According to cobrapaydayloans.co.uk, unsecured loans are ones that do not require any cash, home equity, personal or business assets of any kind. A secured loan is quite the opposite. You have to leverage some assets to the lender to show that you are reliable enough to be given a loan. Interest rates also differ based on what type of loan (secured or unsecured) you apply for and credit score you have.
Personal Loan – A personal loan as you might have guessed is a loan used for any purpose. This can be for debt consolidation (combining all your debt into one), purchasing furniture, buying books, or even back up for emergency situations that might occur in life. Personal loans are usually used for smaller purchases.
Mortgage Loan – A mortgage loan is a loan you take out when you are in the process of purchasing a home. Mortgage loans are secured in that the interest rate is fixed for a certain time (typically 30-year-loan). Mortgage loans can usually be financed through a bank such as Bank of America.
Car Loan – Also known as an auto loan, this loan is necessary for purchasing a vehicle. To get the best interest rate on a car loan, you have to have between good to excellent credit. Banks and car dealerships usually provide a client with this necessary step when purchasing a vehicle.
Student Loan – There are different types of student loans. You can have a Federal Stafford Loan which is based on financial need assessed by the federal government. This is a common loan that students apply for. Then there is the Federal Plus Loan which is awarded to parents who have children attending college. The interest rate is low on this loan and goes through repayment after graduation unless you drop out of school in the middle of the semester. Last is the Federal Perkins Loan which is given to students who have extreme financial situations. This loan also offers a low interest rate.
There you have it, 4 loans that are used for specific needs. To get additional information and more details, I urge you to consult with a financial representative. You always want to make sure all your questions are answered before you decide to sign on the line. Your credit score and your financial situation is definitely a factor in decision making for lenders. Happy loan shopping!