Loan agreements come in many forms and terms. In fact, they range from a simple promissory bill between friends and family to more complex loans, such as auto, payday, mortgage and student loans. Regardless of the type of loan, guidelines apply to each loan to protect the customer from unfavorable practices such as excessive interest rates. In addition, the term of the loan and any default terms should be clearly spelled out to avoid ambiguity or potential legal action.
In the event you need money for a very important item or perhaps to make your life more manageable, it is essential that you are familiar with all the types of loans you can access, along with the various terms you can expect.
Different types of loans
There are different types of loans that have a specific purpose. They can vary depending on how long they run, when payments are due, how interest rates are calculated, and a number of other factors.
Mortgages – These are given by banks to allow consumers to buy homes they can’t afford up front. This will be tied to your home. This also means that your property will be foreclosed on if you default. Unlike other types of loans, this has the lowest interest rate.
Student – These are offered to college students along with their families to help cover the cost of college education. Generally, there are two main types of student loans: those funded by the government and those from private lenders. Experts say that the first option is better, as it has much lower interest rates and better repayment terms.
Personal – These can be used for any personal expenses. This option does not have a specific purpose. For this reason, many are attracted to apply for it. The terms of this type of loan largely depend on your credit history.
Small Business – This is usually given to entrepreneurs or aspiring entrepreneurs to help them start or expand their business. Small business loan options largely depend on the needs of your business.
Automobile or Auto – This is very similar to a mortgage in that it is tied to your property. They help you afford a specific car; however, you run the risk of losing the car if you fall behind on payments. Car or vehicle loans can be offered by a bank or directly by the car dealer. Those offered by the dealer are a little more convenient, but they are also more expensive.
Applying for a loan is not easy. However, seeking the help of an expert may be the best solution. You can find more information on this page.