Almost everyone runs into some financial trouble once in a while. You’ve probably found yourself in a situation where your expenses and needs exceed the amount of money you have in your account. For instance, maybe you want to expand your business or build a new home but you don’t have enough money to cover these projects within a given time. In such cases, one of the best financial aids you can consider is a loan.
A loan is the amount of money one borrows from an individual, bank, or any other financial institution. The borrower has to pay the debt sometimes along with interest. The lender and the borrower need to follow the agreement on which the money is lent.
The loan agreement typically indicates how much money was borrowed, the interest charged, and the duration of the loan until it’s paid off. Short-term loans need to be paid after a few days, weeks, or months. On the other hand, long-term loans last for three years or more, depending on the amount and the agreement signed.
From that explanation, you can see that there are different types of loans you can opt for according to your situation. Depending upon the need, you can choose the type of loan. Many finance companies or organizations are working in the market that offers quick loans depending on your situation and need.
You can apply online for the loan in just a few easy steps and get money in your account. It provides you with financial services that keep your mind at ease. You do not need any appointments in the bank. It is as simple as a click of the mouse. You may need financial help at any time in your life. For that, you must be familiar with many types of credits or loans to avail of them at the time of need.
1. Personal Loans
The amount of money that a person takes to pay for his personal expenditure, which he has to return with some interest over some time.
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● Unsecured personal loans
The amount of money that is given to someone without any collateral(guarantee). This type of loan is quite risky as the lender has nothing to recover his amount if the person is unable to pay the loan back. But the lender charge greater interest along with the borrowed amount.
● Secured personal loans
In this type of loan, the amount of money that a person borrows is backed up by collateral(guarantee) in the form of his house car, or something valuable. In this type of loan, the lender has something to recover his amount if the person is unable to pay his loan.
2. Close-End and Open-End Loans
● Open-end loans
In this type of loan, there is a specific credit limit that you can’t exceed. In this type, you can purchase something within the credit limit and then you have to pay back the used amount each month until the decided period. In Open-ended loans, purchases can be made multiple times if you have paid the used amount within the scheduled time. An example of an open-ended loan is credit cards.
● Closed-end loans
This is the type of loan in which a person borrows a fixed amount for a specific purpose, e.g. for buying a car or home etc. This amount is returned in the form of instalments with some interest over a specific period. The close end loans can’t be altered once the agreement is signed.
3. Student Loans
As the name of this loan indicates that it is designed for the students to help them complete their studies easily without any trouble. The interest rate for this loan is quite low, and the payment is deferred depending upon the completion of studies after which the students pay it back. This loan includes all the expenses of students, for example, admission fee, books, hostel fee, transportation, etc.
4. Auto Loans
The amount of money that is borrowed to buy a vehicle (e.g. car). The money is paid back with some interest in the form of instalments for a scheduled period. This is a type of secured loan that means the loan is secured with the intended vehicle as collateral. The lender has the ownership of the vehicle until the loan is paid back completely.
5. Small Business Loans
The amount of money that is borrowed either to start a new small business or to expand the existing business. The purpose of this loan is to fuel the growth of the business. It is also called startup financing. The loan is paid back to the lender with an interest rate and in the form of repayments over a scheduled period.
It’s worth noting that the application requirements and processing time depend on the type of loan. As with personal loans, there are two types of business loans—secured and unsecured. For secured loans, you need collateral, such as a tangible asset, to back your loan in case you’re unable to repay the total amount. But according to RLA Capital, collateral is not required when applying for unsecured business loans. Loan processing also takes less time compared to secured loans because there are no asset valuations.
6. Payday Loans
The amount of money that is borrowed for a short term by a person and returned in the form of a postdated check with high-interest rates. For example, in this type of loan, one can borrow some money depending on their salary from a lender in the form of cash and in return the borrower writes a postdated check to pay it back. This is often associated with high-interest rates.
7. Title Loans
Title loans are the types of loans in which the borrower provides some kind of asset to the lender as collateral. In most cases, it is either property or some vehicle. They hand over the papers of the car or other asset to the lender and get some money in exchange. After all the loan payments are done, they can take their document back, and if due to some reason, they are unable to return the due amount then the lender becomes the owner of that asset.
8. Debt Consolidation Loans
If you owe someone some money and you do not have the resources to pay them back, then debt consolidation loans can provide you with a sort of temporary relief. You can take these loans to pay off multiple debts, but of course, you would still be indebted but to a different person now. These types of loans also lower your credit score. That is why always make sure to pay your debts on time, but if it is not possible and you have used all other methods, then you can go for these.
9. Borrowing From Family or Friends
If you require money, then one of the most commonly used ways is to borrow money from your friends and family. Since they care about you, returning the money would not be a hassle. But, you can not always rely on friends and family for loans because it might be possible that they do not have the amount you are asking for.
10. Cash Advances
If you need urgent and fast cash, then you can opt for a cash advance. But be aware that the interest rates for this type of loans are very high. Due to their high rates and various other reasons, these types of loans for merchants are considered illegal in some states. On the other hand, cash advances by different credit card companies are completely legal. You can go for those if you are looking for quick money.
11. Home Equity Loans
If you own a house and you are urgently in need of some money, then you can borrow this money based on the equity of your house by keeping it as collateral. The amount of loan money depends on the equity of your house. You can essentially borrow up to eighty-five per cent of the equity of your house. For a home equity loan, a lender also looks at your income, your debt history, and your bank statement, etc.
If you want to buy a house or some property and you do not have enough resources to buy it, then you can turn to mortgages. In this form of a loan, you pledge your property while you are paying its price along with interest in a predetermined instalment. If you are unable to pay back this loan amount, then the lender can take the property from your custody.