Loans today come in different forms. They differ in the loan amount limits, repayment period, interest rates, and requirements. When you consider applying for a loan, it is important to look at the terms of the loan as well as its requirements. This will help you identify the loan that suits your needs at a particular time. The most common types of loans available include:
These are loans given to individuals who desire to own a home. The lender is usually agreeable to lend the borrower a huge sum that is able to meet the cost of the property for purchase. The property can be used by the borrower but the ownership title is given to the lender until the loan is repaid to the full. In case of any default, the lender has the right to repossess the property and put it to the market for sale in order to recover the pending loan amount. Mortgages are usually referred to as long term loans. This is because they often include huge sums of money which is repayable over several years. They can run for a term that spans from 7 years up to 25 years in other cases. Since mortgages are secured loans with the property attached to the loan as an asset, they often have very low interest rates when compared to other loans.
Car loans refer to loan sums given to borrowers to acquire a car. In many cases, the money is not directly handed to the borrower but is instead channeled to the car sale company for the automobile desired by the borrower. Car loans are secured types of loans since the logbook to the car is retained by the lender for the loan period. Car loans are usually payable in a few years thus are not really looked upon as long term loan. For the fact that the car depreciates in value from the day of purchase also makes car loans best for payment in a few years at most. While the car documents remain with the lender, the borrower is usually free to use the car while repaying for the loan acquired.
Payday loans are short unsecured types of loans. They are loans of small amounts which are payable in a month or within 3 months. They have a high interest rate since they are unsecured loans. The repayment is usually set to match the borrower’s payday and the money is usually recovered as soon as the borrower receives their salary. This loan is usually designed for the employed and can be taken up by individuals who have a poor credit record.
Guarantor loans vary from one lender to another. There are both long and short term guarantor loans. The short term guarantor loans are offered to those who have a poor credit record while the long term guarantor loans are offered to those with a good credit record. The loan amount, interest rate, and repayment period usually varies between the short term and long term guarantor loan. The borrower is free to choose who will be the guarantor. It can either be family, friend, employer, landlord, or neighbor. The common thing about long term and short term guarantor loans is that the guarantor should have a good credit record. However, in the case of long term guarantor loan, the guarantor must be a property owner as an asset will be required for attachment to the loan.
These are loans given to students to help them settle their expenses for higher education. There are student loans offered by the government as well as those offered by lenders or banking institutions. The best student loans are those offered by the government. They have lower interest rates and also have more flexible terms when compared to those offered by other lenders. For those already working, the student loans are deducted on a monthly basis as they carry on with studies. However, for those learning full time and are not yet working, the loan is repayable after completion of studies when they have acquired employment. This kind of loan is mainly offered by the government.