The most popular types of loans explained

Loans have been around for numerous years, which is the main reason why the lending market has evolved, and now offers a variety of solutions for all types of clients. With this in mind, in case you’re in need of a specific item, need to deal with a financial emergency, or plan on going on a trip, or even buying a house or a car, chances are that there is a perfect type of loan for you that will most likely suit you and all of your needs.

Before we get into the various types of loans being offered on the market, it is worth pointing out that regardless of the size of the loan, or its type, or even company where you have gotten it from, all loans and their institutions are governed by a set of laws, and conditions for achieving the loan, but also for repayment. This can help protect you against unsavoury practices from the financial institutions, which is great news, as you can always initiate legal action in case your rights are not being respected.

To kick things off, here is a list of some of the most common types of loans available on the market:

Student Loans

These are perfect for college students, alongside with their families, in order to allow them to afford the cost of purchasing higher education. In the US, there are both federal and private student loans being offered.

Mortgages

Buying a house is a big event in the life of any person, yet it can be quite expensive, and having all of the money to pay for it upfront can be quite difficult as well. With this in mind, mortgages are loans given out by banks, and meant to allow people to purchase a house upfront. However, if you don’t pay back the money on time, then you risk something known as foreclosure, which is basically having your house taken away from you, and sold on the market to the highest bidder.

Auto Loans

Auto loans are quite similar to mortgage loans, and are tied to the car that you purchase upfront with the auto loan in store. With this in mind, if you are not able to pay back the money on time, you will lose the car that you have just bought. The main benefit of mortgage and auto loans consists of very low interest rates, when compared to other types of loans on the market.

Personal Loans

Chances are that these likely are the most popular types of loans being given on the market. With this in mind, they can be used for just about any personal expense, hence not having a designated purpose. They vary in size based on your credit score, but also on your needs. Interest fees tend to vary, yet aren’t too high given the long processing times, and the lack of an emergency on the funds.

Small Business Loans

In case you’re considering the idea of starting up a business, then chances are that you’ll be looking for a small business loan. These are basically meant to help entrepreneurs start or expand you’re a business, have normal interest rates, and are given by banks after negotiation.

Consolidated Loans

Consolidates loans are an entire new category on their own, considering the fact that their main purpose is to simplify all finances. With this in mind, a consolidated loan has the potential of paying several, or all of your other debts, at the same time. This means lower interest fees, but also fewer monthly payments that you have to make.

The idea of borrowing from friends and families

While most people don’t consider this a loan, speaking on the exact term, it is a loan. While it is frowned upon, borrowing from friends and family can be a solution in case you’re dealing with a financial crisis, and don’t want to resort to using a traditional loan.

Payday loans

In case you’re not particularly fond of the idea of borrowing from friends or families, then chances are that you might want to try payday loans out. These are short-term loans, mostly designed for those who are dealing with financial emergencies, which vary in size from around £50 to a few hundred, or thousand, depending on what your monthly salary is. Credit score is usually not taken into consideration by most payday loan agencies, given the small size of the loans that you are taking.

Based on everything that has been outlined so far, these are some of the main forms of loans that you will find on the lending market. There are a few more, which are more specialized, and cannot be accessed by the general public with ease, or are designed for certain people only. Regardless, it is highly-likely that you will find a loan that suit your current needs in this list.

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