Types of Loans to Know

Loams can be used to help one achieve some of the primary goals that they cannot afford at the time. However, before borrowing any loan, it is essential to know the different types that exist so that one can be able to choose the loan that fits their needs. This article will discuss five types of loans that anyone needs to learn about and their key features. Explore and learn.

• Personal Loan

One of the loans that can easily be accessed is a personal loan, which one can use for emergencies or help them achieve some of their goals. The personal loans are usually unsecured, meaning they do not need one to provide any collateral.

Personal loans interest rates tend to be fixed or variable depending on the amount taken. For example, the loans have a fixed/flexible repayment period of a few years or months. According to Lantern by SoFi, anybody can qualify for a personal loan if they have good records with their banks or creditor.

• Home Equity Loan

To get a home equity loan, one must use their home as collateral to get the money. The loan amount one can get determines the difference between the home’s market value and how much is to be paid for the loan.

One can also borrow an equity loan based on the home’s equity. This means that one cannot borrow more than 85% of the equity they have for their home. For example, one is given 20 years to pay off the loan, where they pay with interest.

• Student Loan

A student loan is the amount of money a student is given to help pay their college fees by a lender. There are two types of student loans: federal and private student loans. The federal student loan repayment terms are favorable with no interest. In contrast, for private student loans, there is interest, and the creditors determine the repayment period.

• Mortgage Loan

The mortgage loan is given to cover the purchase of a house, with the house acting as the collateral. The mortgage loan usually covers the price of the car minus any down payment given. They are usually paid over a long period, which ranges from 10 years to 30 years. The mortgage tends to have a fixed interest that stays the same throughout the agreed period.

• Car Loan

The car or auto loan usually covers the price of the car minus any down payment given, with the vehicle acting as the collateral to the loan. The repayment period of the auto loan ranges from 36 months to 72 months, depending on the creditor, and the interest tends to be the same over the said period.

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Learn About the Different Loans

Understanding the different types of loans available makes it easy for the borrowers to determine the one that best fits their needs. If you choose to take a loan today, ensure that you understand its features, including the interest and payment terms, to avoid having issues with your creditors.

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