There are various types of loans and loan contractors that have different terms, ranging from simple loans between friends and family to more complex ones like mortgage, auto, payday, and student loans.
Credit unions, banks, and other people lend money important and necessary items such as houses, cars, and student loans. However, other loans, like small business loan are only available for a specific group of people.
No matter what the type of loan is (and its conditions for repayment), it is governed by the state and federal guidelines to protect the customers from illegal practices such as excessive interest rates. Additionally, the length of the loan and some terms should clearly be stated in the contract in order to avoid any confusion.
If you need an important thing, but you are in need of money, it is good to know what type of loans are available in order to decide which one would be best for you. Loan types will be different since each one has a specific use. The repayment time can be different, when the payment is due, and how the interest rate is calculated. Here is a list of the types of loans:
1. Student loans – these loans are offered to college students as well as their families to help pay for the cost of education. There are two main types, federal and private student loans. Loans that are federally funded are better since they usually come with a lower interest rate and have more borrower-friendly repayment terms.
2. Mortgages – these loans are given by banks in order to allow the customer to buy homes that they cannot pay for up front. It is tied to a house, which means that there is a risk of foreclosure if you are late with your payments. These loans have the lowest interest rates among all other loans.
3. Car loans – similar to mortgage loans, auto loans are tied to the vehicle you buy. They can help you too but a car that you want, but you are at risk of losing the car is you do not pay your monthly fee. You can get this type of loan at a bank or a car dealership, but you should keep in mind that while the loans from the car dealership might be convenient, they usually have higher interest rates and an overall cost.
4. Personal loans – these can be used for any personal expense that does not have a specific purpose. This is an attractive option for people who have debts, or who want to reduce their interest rates by transferring balances. Like other loans, the terms will depend on your credit history.
5. Small business loans – these loans are granted to entrepreneurs in order to help them start or expand their business. The best source for these loan types is the U.S. Small Business Administration (SBA), which provides people with a wide range of options that will depend on the business needs they have.
6. Payday or quick loans – payday loans are short-term, high-interest loans that are designed to provide a bridge between one paycheck and the other. Guarantor loans similar to Amigo Loans can help people who need money to survive until their next paycheck.
Whether or not you decide to borrow money, always make sure that you have read the terms and that you understand them perfectly. Always familiarize yourself with the repayment terms, such as the monthly amount of money you need to pay, how long is the repayment for the loan, as well as the consequences of missing a payment.