Some purchases cost too much, for example, a house or a car, that regular people may not be able to afford in their present financial state. To be able to afford these items, you may need to apply for a loan, which you would have to repay over an extended period. The need for a loan is not limited to individuals. Big corporations also make use of loans to operate their businesses.
There are several types of loans that individuals and companies avail of regularly. These loans differ in their repayment period, amounts, type of collateral, as well as the clientele they serve.
Secured vs. Unsecured Loans
Secured loans are those with a property used as collateral. This kind of loan offers low interest rates. Lenders offer low rates for secured loans since failure to repay it can mean the lender can take possession of the collateral and sell it to recoup expenses.
Unsecured loans, on the other hand, do not have collateral, and so they charge higher interest rates due to the risks posed by the transaction. These loan terminologies can be confusing, particularly to first-time borrowers. Collateral is deemed any object of value that is used as a guarantee for the repayment of the loan.
Cash Advance Loans
Cash advance loans can come handy in cases of emergency. They are often referred to as “payday loans.” They are short-term loans that can last two weeks and bear very high interest rates.
A borrower can loan up to $1,500, and the approval is faster compared to other loan types. You will receive the money in your bank account within hours of applying for a loan. In Texas, late payers try to refinance their loans to avoid hefty charges.
Business Loans and Business Lines of Credit
As the name suggests, this kind of loan is specifically made for businesses. They can be secured or unsecured and would often involve huge sums of money. This loan is offered to businesses that are already in operation.
A business line of credit, meanwhile, is a flexible commercial loan that allows you to withdraw money, pay it back and withdraw again.
Home Loans
Financial institutions and banks lend money to borrowers who wish to acquire a property. There are two kinds of home loans: fixed rate and variable rate.
Fixed rate loan is secured at a specific rate and will not change for the life of the contract. Variable rate loans can change depending on fluctuations in the economy. Also, the total debt can change and increase over time.
Student Loans
These are granted to students to help them in paying for their studies. The loans are provided by private institutions or the government and can be extended to the student or the parents. Often, this kind of loan is secured by the parents, as the sums offered are a bit higher.
There are other loan types in the market including VA, low credit, first-time buyer, general mortgage, vehicle, fresh start and military loans. With the diverse offerings, there is a specific loan out there that can cover your financial needs.
