The Different Types Of Loans And Their Benefits

The Different Types Of Loans And Their Benefits

Not everyone is financially secure and stable, and at times, we need a helping hand in order to achieve something important. When it comes to finances, one of the best things that you can provide yourself is loans.

These things always come in handy whenever we want to accomplish huge goals like purchasing a house, buying a car, attending college, and many other things. Generally speaking, there are all kinds of loans out there.

Many people even utilize them even when they want to pay off current debt. So if you consider having any type of debt, then it would maybe be smart to get yourself familiar with different types before you apply for one. Below, we’ll compile the list of the most common ones.

The List Of Most Common Types Of Loans

Personal Loans

While mortgage and auto loans are intended for a particular purpose, personal loans, on the other hand, can be literally employed for anything that you want. Some people use them for something that’s urgent, while there are those who opt for them because they need to perform some home upgrades, weddings, etc.

Generally speaking, these types of loans are normally unsecured, which means they do not require any collateral. One of its biggest advantages is definitely its flexibility and versatility, plus the fact that it frequently comes with lower interest rates in comparison to credit cards.

Namely, people with great credit history can qualify for personal loan rates in the range of six percent and up to eight percent. Additionally, consumers can, for instance, qualify for a higher loan amount in comparison to the limit on their credit cards.

Boat Loan

Many people think that getting a boat loan takes a lot of time. But the truth is, this whole process is actually quite simple and fast. The only thing you need to worry about revolves around a minimum credit score because a majority of lenders will be looking for a score that is at least 700 and higher. Now, you can get this loan with a lower credit score, however, you may be dealing with a penalty in the form of a larger down payment or high-interest rate.

Nowadays, you can get boat loans from credit unions, banks, online lenders, and other various institutions. For starters, you can contact your personal bank to see what financing options are at your disposal.

If you manage to successfully choose a great boat lender, you’ll be reaping great benefits, like flexible down payment requirements and term limits, low rates, widespread availability, and many other things.

Adding More Types Of Loans Below

Student Loans

Students who want some sort of financial help for college and graduate school, usually opt for student loans. They can be obtained from both private lenders and the federal government. Federal student loans are generally a better option because they offer forbearance, deferment, income-based repayment alternatives, and forgiveness.

Moreover, they are funded by the United States Department of Education and are provided as financial assistance through school. What’s great about them is the fact that they do not require a credit check. 

In order to apply for a student loan, the student’s family must fill out the Free Application for Federal Student Aid, or short for FAFSA, which is generally much easier in comparison to the processes done through private lenders. 

Mortgage Loans

This type of loan covers the purchase price of a house minus a down payment. Namely, your property is defined as collateral, which can easily be taken by the lender if you miss your mortgage payments.

In most cases, mortgages are repaid over ten to thirty years. Additionally, conventional mortgages aren’t insured by government institutions. What are the biggest benefits of mortgage loans?

Probably the biggest one is that you don’t have to bequeath the ownership of the house, and you’ll be able to obtain the loan at a very low-interest rate, which isn’t the case with most other loans.

Auto Loans

Once you decide to purchase a vehicle, this loan allows you to borrow the price of the automobile, minus down any payment. Just like with property, your car is defined as collateral and can be taken as well, if you stop making payments. Normally, auto loan terms range from thirty-six and up to seventy-two months.

The greatest advantage of this loan is the fact that it doesn’t charge penalties for early payoff and offers you the flexibility of ending the credit contract ahead of schedule.

Besides these types of loans that were enumerated here, there are a few more that weren’t mentioned. The whole point of discussing loans is to show you the basic rules and benefits that each of these offers.