There are so many different loans flooding the loan market today, that it can be overwhelming to understand what they’re all about. Loans are essential today as they provide access to funding that would otherwise be impossible. Understanding a few of the different loan options available on the markets today can help you to make the right financial decisions of which loans would best suit you and your financial needs!
- Secured and unsecured loans come in various shapes and sizes. A secured loan allows a loan applicant to secure a sum of money through offering a valuable asset as security. In the event that they are unable to make the loan repayments, the lender has a leg to stand on and can make back their money through selling off the asset. These loans have the added perk of coming with low interest rates on the repayments, but you need to have the valuable asset in order to secure the loan in the first place.
- Unsecured loans are exactly what their name says. They are loans that are approved without using an asset as collateral to borrow against. So where does the lender get their security from? With this type of loan, the lender bases their approval on your credit history. If you’re the owner of a poor credit score, you are seen as unreliable and a high risk applicants, and chances are that your loan is more than likely to be denied. Unsecured loans are generally the type of loan you can receive at a bank, and if your credit score is not something to be proud of, you may want to think twice before taking out this loan.
- If you’re interested in buying a home, and you need to take out a mortgage which is a very popular loan, you could get this from the credit unions, or banks. Essentially, a mortgage is a loan that you take out in order to buy a home, and you’re not talking about a few hundred dollars, it’s possibly one of the biggest loans you’ll take. If you aren’t able to make the repayments on this loan, your home is used as collateral, so it’s best to cover the costs and avoid being left without a roof over your head.
- Short term loans, are fast, usually cash loans that come with a short term repayment plan that you’ll have completely in a few weeks. Simply put you won’t be making loan repayments for years to come, and they come in various forms, like payday loans and car title loans.
- And finally on the list are open-ended loans. Essentially this is the type of loan you get from your credit card. Your credit card comes with a credit limit which you “borrow” against by making purchases. These loans are open ended as you borrow, make repayments and then borrow again, with no end!
With so many loans to choose from, there is bound to be at least one that suits your financial needs!