A Look at Common Types of Loans
People sometimes wonder about common types of loans, especially with all of the different types of loans available. There are many common types of loans that may fall into the same categories, as well as some common types of loans that are only different in one or two small ways. Below are the descriptions for several common types of loans, including some of the factors that may restrict who is eligible for the loan and how much interest different individuals might have to pay for the loan. Of course, this doesn't cover all of the loans that are offered? only the loans that you are most likely to encounter. Secured and Unsecured Loans Most if not all common types of loans fall into one of two categories? secured loans and unsecured loans. Secured loans are those loans that use some object of value, which is referred to as collateral, as a guarantee of repayment and a method of offering lower interest rates. Unsecured loans, on the other hand, require no collateral but almost always have a higher interest rate than secured loans. Both of these types of loans may be affected by your credit rating, and secured loans may be affected by the value and type of your collateral. Student Loans Student loans are one of the common types of loans that provide money for a person to continue their education. These loans are often supported by the government, allowing them to be unsecured loans while maintaining lower interest rates. Many student loans have a deferred repayment option, allowing the student to put off repaying the loans until after they've finished school. Auto Financing Another of the more common types of loans is auto financing, which is a secured loan that is used to purchase a car, truck, or other vehicle. The vehicle that is purchased serves as the collateral for the loan, allowing a person to purchase the vehicle without having to put up additional collateral to secure the loan. Since most vehicles are higher value items, auto financing is often available to individuals of a variety of credit ratings. Mortgage Loans Mortgage loans are loans that are used to purchase or refinance a house or real estate, and are one of the most common types of loans. Much like auto financing, mortgage loans require no additional collateral since the purchased property serves as the collateral to secure the loan. Mortgage loans tend to vary in interest rates and repayment terms, with common repayment options sometimes lasting as long as 30 years for larger mortgages. These loans can be gotten from a variety of lenders, including standard banks, finance companies, and online lenders. Homeowner Loans Very similar to mortgages, homeowner loans are loans that are taken using a house or other piece of real estate as collateral. The major difference between homeowner loans and mortgage loans is that homeowner loans are taken out on property that the borrower already owns, and uses equity (which is the portion of the property's value that's already been paid for) as a major determining factor in interest rates and other loan terms. Most individuals who own a home or real estate can qualify for homeowner loans (with sufficient equity), regardless of their credit rating. Like mortgage loans, homeowner loans can be obtained from traditional banks, finance companies, online lending services, and other lenders? a growing trend in recent years, however, is for homeowner loans to be gotten via online services because of the increased convenience and anonymity of online lenders. You may freely reprint this article provided the following author's biography (including the live URL link) remains intact: About The Author John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.
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A Brief Look At Loans
"Innovative financial packaging" is how it is sometime known. Essentially
what this means is that financial institutions look for more and more ways to
lend to their customers - after all, charging interest on a debt is the main way
that they make their money. But, with more and more loans now available, it can
sometimes be difficult to know exactly which loan to apply for. The following
explanations try to clear this issue up a little for you:
Personal Loan
Probably the mainstay of financial institutions is the personal loan. As the name
suggests, personal loans are money borrowed from a financial institution for personal
use. In nearly all cases, a personal loan is going to be unsecured, which means
you'll likely be paying a premium on interest. Once the personal loan is given,
you repay it by making monthly repayments to the lender. In effect, this is the
multi-purpose loan.
Auto Loans
Auto loans are where you borrow money from a financial institution in order to
buy a car or vehicle. In most cases auto loans are done by the car dealer, but
there is no reason why you cannot make arrangements with your bank before buying
the car to borrow the money from them. As with a personal loan, most auto loans
need to be repaid by monthly installments. Sometimes, although not always, the
financial institution will secure your loan with the vehicle, which means if you
cannot repay the loan they'll repossess your car. One additional expense with
an auto loan is that most lenders insist that you take out fully comprehensive
insurance during the period that the auto loan is outstanding.
Home Improvement Loans
As the name suggests, home improvement loans are where you ask a lender to lend
you money so you can improve your home. In most cases a home improvement loan
is granted on the condition that you give the lender a second rank mortgage on
your home. As such, the loan amount can rarely exceed the valuation price of your
home - including the increased value after the improvements have been made. Again,
home improvement loans usually need to be paid by monthly installments; however,
balloon (or bullet as they're also know), one-off, payments are also sometimes
accepted.
Education Loans
Education loans are where you borrow money to further your studies. One big difference
between an education loan and any other type of loan is that most education loans,
although given by a financial institution, are underwritten by the government.
Consequently, the interest rate on education loans (also known as "student
loans") is usually very low.
Holiday Loans
These days it is even possible to go to your bank and ask them to borrow money
so that you can go away on holiday! As you'll be using the money to go on holiday,
this type of loan is unsecured. Consequently, interest rates are high. Not really
a recommended way of paying for your holiday, but nice to know it's out there
if you need it!
Debt Consolidation Loans
Unfortunately debt consolidation loans are becoming more and more popular these
days. A debt consolidation loan is where you have too much debt on store cards
and credit cards and you need to borrow money to pay these all off and consolidate
them into one big debt. The advantages of doing this are two-fold: (i) hopefully
you'll lower the borrowing interest rate; and (ii) you only have to deal with
one creditor.
Having decided upon the type of loan you want, all you need to do now is to ask
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