Common Types Of Loans

A loan is the sum of money borrowed and then repaid overtime or in future with interest. Typically, a loan is a fixed amount such as $ 18, 0000 and $ 7, 000. There are different kinds of loans that you can apply for. The amount of obtained and the interest rates depend on the borrower’s income, credit, and debt history. However, you do not have to worry if your credit rating is poor because some lenders are ready to give loans without checking the credit history. This is something that has helped individuals who do not have a regular income or whose businesses have been affected by the bad economy. They are referred to as “smile loans”. The smålån på dagen have helped many people to meet their financial needs especially when they are in a crisis. Understanding and knowing the available loan options is helpful in making a better decision. You should go for a loan that meets your goals.

Closed-ended and open-ended loans

The open-ended types are those loans that can be borrowed over and over. Lines of credit and credit card are the common types of these loans. Individuals can either use part or their entire credit limit depending. The amount borrowed is dependent on the borrower’s goals or needs. The credit decreases whenever you buy something. Once you make payments, the credit increases. This means that the same credit can be used over and over again. On the other hand, close-ended loans cannot be borrowed any more once they have been paid. The balance goes down when payments are made. The common types of these loans include auto loans, student loan, and mortgage loans.

Secured vs. Unsecured loans

Secured ones are obtained using assets as security. The lender will sell the asset to recover his or her money if fail to repay the borrowed amount. They have a low interest rate as compared to the unsecured types. The value of your asset has to be determined fist for you to qualify for a loan. A good example is the title loan. You can borrow an amount that is equivalent to the value of your item.

Unsecured loan

These do not require any asset for collateral. They high a high interest rate and they cannot be acquired easily. The amount given depends on the borrower’s history and his or her income. In the case of loan default, the lender can use different options to recover his money. For instance, he can opt to use lawsuits or debt collectors.

Loans to avoid

Some lenders are out there take advantage of the consumers by exploiting them. They have very high interest rates and paying them off can be very difficult. They are short-term loans. You can use your next paycheck as a guarantee for these loans. You should exhaust all the other alternatives before applying for these loans.…