The Different Types of Loans
As you begin comparing loans, you’ll find that your credit is often an important factor. It helps determine your approval and loan terms, including the interest rate.
To help you get started, we’re discussing some of the different types of loans out there to give you some incite.
1. Payday Loans
Payday loans are short-term, high-cost loans that are typically due by your next payday. States regulate payday lenders differently, which means your available loan amount, loan fees and the time you have to repay may vary based on where you live. And some states ban payday lending altogether.
To repay the loan, you’ll typically need to write a post-dated check or authorize the lender to automatically withdraw the amount you borrowed, plus any interest or fees, from your bank account.
2. Debt Consolidation Loans
Simplify your finances with debt consolidation loans. 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. Consolidation loans are typically in the form of second mortgages or personal loans.
3. Student Loans
Student loans are given to college students. They help cover the cost of higher education. There are two main types: federal student loans and private student loans. Federally funded loans are better, as they typically come with lower interest rates and more borrower-friendly repayment terms.
4. Cash Advances
A cash advance is a short-term loan against your credit card. Instead of using the credit card to make a purchase or pay for a service. Receive cash by bringing it to a bank or ATM. Cash advances also are available by writing a check to payday lenders.
Whenever you decide to borrow money – whether it is to pay the bills or buy a luxury item – make sure you understand the agreement fully. Know what type of loan you’re receiving and whether it is tied to any of your belongings.
Also, familiarize yourself with your repayment terms: what your monthly obligation will be, how long you have to repay the loan and the consequences of missing a payment. If any part of the agreement is unclear to you, don’t hesitate to ask for clarifications or adjustments.