What Are Different Kinds of Loans?
Loans come in vast varieties ranging from simple promises regarding lending money to family members and friends to the complex form of loans offered by banks like payday, mortgage, auto or student loans. Similarly, the terms and conditions regarding different loans are also different. Some loans like low interest student loans offer minimal interest rates. Some have less instalment per month, or some are long term loans.
It should be remembered that banks or other loan providing companies lend money for essential and authentic purposes like buying cars, house, or a student loan. They don’t give money for unnecessary purposes. Some kinds of business loans are only available to a specific class of people.
Kinds of Loans
Following are some of the different kinds of loans...
- Unsecured personal loan:
Many people need money for some personal purposes like paying wedding expenses, returning a debt or renovating their house. So, banks offer them personal loans to fulfil their particular needs.
In the case of personal loans, two kinds of loans are offered, Secured personal loans and unsecured personal loans. In unsecured personal loans, the borrower doesn’t need to put something on the line like a house or a car to get the loan.
- Pawnshop loans:
Another option for borrowing money fast is “pawnshop loans”. In this kind of loans, you need to take a valuable thing like a piece of jewelry with you to the pawnshop and get money based on its value in the market.
The terms and conditions apply to this kind of loan may vary from place to place. You won’t get that valuable thing back unless you have paid the amount of borrowed money. The period of repayment also varies. This type of loan is considered the best for small amount loans having no creditcheck.
- Secured personal loans:
While in case of secured personal loans, the borrower needs to offer something collateral to get the loan, or in other words “secure” the loan. In this kind of loan, the borrower has an asset that backups your loan, making it less risky. Du to this reason, the interest rates charged on secured loans are less than unsecured loans.
- Payday alternative loans:
Payday alternative loans, as the name shows, are alternatives to payday loans. As they are more affordable, people like these loans. PAL is a short-term loan whose amount may range from $200 to $1000. The more extended repayment period of about two to six months makes payday alternative loans more economical for the lender than most of the payday loans. In a typical payday loan, the borrower gets a time of a few weeks for the repayment of the loan. So, most people prefer payday alternative loans.
- Home equity loans:
A home equity loan is a subtype of secured personal loan. In this type of loan, the lender has to use his house as collateral to borrow the money. The money borrowed is then used for the personal purposes of the lender.s
In this kind of loan, the amount of money borrowed is equal to the equity of your home. It is the difference in the market value of the home and the amount you owe in your house. It is a general rule of home equity loan that you cannot get a sum of money more than 85% equity of your home.