The most popular type of financial tool that everybody is aware of is a loan. Although the word might sound simple, there are many types of loans, and you should be able to discern different loans for choosing the right one.
Loans are a specific form of financing that allows borrowers to buy high-priced items they can’t pay cash for today. For example, if you plan to buy real estate but don’t have enough savings in your account, you can apply for a loan and buy that real estate from the loan money.
But it doesn’t matter which type of loan you are looking at, the state and federal guidelines govern them all. The main goal of these guidelines is to protect the consumers from all the unsavory practices like high-interest rates. Along with this, the default terms and loan length should be mentioned in the contract to avoid any issues in the future.
The most important thing that you should know about this financial tool is its type, and this is what we will discuss in this blog post.
This is the most common type of loan, and this is also the oldest type of loan available in the market. The one thing that makes personal loans one of the best types of loans is they can be used for any purpose. Secured and unsecured personal loans are the best option for everyone with a credit card debt as the loan helps in procrastinating the interest rate by transferring the balance.
Even in a personal loan, the interest rate and the term you have to repay the loan depend on your credit history. The loan company always goes through your credit history before approving the loan.
Jewelry equity loan
This is a unique type of loan that allows you to access quick cash within 48 hours. It is the speed of jewelry equity loans that makes it so popular. Unlike personal loans, you don’t have to wait for a week for the documentation process, and the loan company does no credit history check.
In this case, you can always get a loan against gold and diamonds. It would be best if you had jewelry valuable enough to get a loan, and then the company will send you a quote based on your jewelry. After that, you can ship the jewelry for approval and get access to quick cash. Opting for a loan against gold is one of the best options.
These are secure loans that are tied to the property. You can opt for these types of loans to buy a vehicle, but you can lose the vehicle if you fail to repay the loan on time. If you plan to go for auto loans instead of choosing a loan against gold, you must know who offers these types of loans.
Auto loans are offered mainly by the bank, online lender, car dealership, or credit union. Among all these options, the car dealers are the one who charges the highest interests rate.
This type of loan is usually offered to college students to cover the cost of higher education. Because of the advent of COVID-19, the interest rate on student loans was reduced to 0%, and it will remain the same until 30th Sep. 2021.
You can apply for two types of student loans: private student loans and federal student loans. If you want lower interest rates, you should go with the federal lent loans, as in personal student loans, the interest rates will always be high.
These types of loans are distributed by banks, online lenders and credit unions, and it is used for buying homes. But remember that a mortgage will always be tied to the house. So, if you fail behind the monthly payment, you might have to deal with foreclosure.
But the best part about mortgages is they have the lowest interest rate since they are considered the most secure form of loans. The standard loan term in mortgages is 15 to 30 years, and the interest rate ranges between 2.8% to 5.6%. But even to apply for mortgages, you must have a good credit score.
If you are new to the world of loans, then the different loan options might make things more complicated for you. But keep in mind that there is nothing like the best loan option as every type of loan has its advantage and disadvantage. So, go through the loan mentioned above types and choose the one according to your need.