Need money now? Learn what a loan is and some of the most common types of loans that people get. Find out which loans are best for different situations and some of the advantages and disadvantages of getting a loan. Also you will see the names of the most reliable loan companies.
Do you need money now?
- If you have never received a loan to purchase something – you are certainly in the minority!
Loans might be a very helpful thing, but they can also get you into big trouble.
One of the keys to being financially successful is understanding when loans are a good solution for your situation.
- Loans are never a good idea if you can’t afford to pay them back in the required time frame
Let’s explore what a loan is and find out some of the common ways to borrow money.
A loan is when you borrow money from a friend, bank or financial institution in exchange for future repayment of the principal, plus interest. The principal is the amount you took, and the interest is the amount charged for receiving the loan. Since lenders are taking a risk that you may not repay the loan, they have to offset that risk by charging a fee - known as interest.
Need money now? Types of loans
A secured loan involves pledging an asset (for example, a car, boat or house) as collateral for the loan. If the borrower defaults or doesn’t pay back the loan, the lender takes possession of the asset. An unsecured loan option is preferred, but not as common. If the borrower doesn’t pay back the unsecured loan, the lender doesn’t have the right to take anything in return.
Open-ended loans are loans that give you an opportunity to borrow over and over. The most simple examples are Credit cards and lines of credit. Both of these loans have a credit limit which is the maximum amount you can borrow at one time.
Do you need money now?
Credit cards let you borrow money up to a set limit, which must be repaid. You’ll be charged interest if you don’t pay your full statement balance by its due date, and you’ll often be penalized for late payments. Positive payment activity can help build your credit scores.
Closed-ended loans are one-time loans that cannot be borrowed again once they’ve been repaid. As you make payments on closed-ended loans, the balance of the loan goes down. If you need to borrow more money, you should apply for another loan and go through the approval process over again. Examples of closed-ended loans are auto loans, student loans and mortgages.
Need money now? Variety of loans for your reasons
Debt Consolidation Loans
A consolidation loan is meant to simplify your finances. Simply put, a consolidation loan pays off all or several of your outstanding debts, particularly credit card debt. It means fewer monthly payments and lower interest rates.
Student loans are offered to college students and their families to help cover the cost of higher education. There are two main types: federal student loans and private student loans.
Personal loans can be used for any personal expenses and don’t have a designated purpose. This makes them an attractive option for people with outstanding debts, such as credit card debt, who want to reduce their interest rates by transferring balances. Like other loans, personal loan terms depend on your credit history.
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Small business loans are granted to entrepreneurs and aspiring entrepreneurs to help them start or expand a business. The best source of small business loans is the U.S. Small Business Administration (SBA), which offers a variety of options depending on each business’s needs.
Mortgages are loans distributed by banks to allow consumers to buy homes they can’t pay for upfront. A mortgage is tied to your home, meaning you risk foreclosure if you fall behind on payments. Mortgages have among the lowest interest rates of all loans.
Like mortgages, auto loans are tied to your property. They can help you afford a vehicle, but you risk losing the car if you miss payments. This type of loan may be distributed by a bank or by the car dealership directly but you should understand that while loans from the dealership may be more convenient, they often carry higher interest rates and ultimately cost more overall.
Do you need money now? If you decide to borrow money – it doesn’t matter if it is to pay the bills or buy an expensive laptop – be sure you understand the agreement from all sides. Know what type of loan you’re applying for and how it is connected with some of your belongings.
Read about all types of loans and choose what is suitable for you.
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