7 Common Types of Loans You Can Avail

Do you want to buy a brand new car? Start your own business? Or do you want to transfer to a new home? Reaching all those dreams can be simple with the help of various loan programs. Check out these five common loans offered by banks or lending corporations.

Student Loans

Students loans are usually offered to college students to cover their cost of higher education. Families can apply to either federal student loans or private students loans. Federally funded loans come with lower interest rates and more borrower-friendly payment terms while private student loans come with a much higher interest rates and other requirements. Since 1980, the cost for higher education increases rapidly. Public universities jump to 344% increase while private has 241% increase.

Auto Loans

Auto Loans can help you afford your dream car. Most of the auto loans follow a system in which the bank will pay for your car and you will pay the bank. Car loans offered by banks can be simple interest loans or pre-computed loans. However, there are also auto loan programs offered by car dealerships, however, requires higher interest rates and not-so-friendly installment solutions. The average amount of loan finance in the year 2015 in the US was $28, 711 with average monthly payments of $485.

Mortgages

Mortgages are loans distributed by the bank to allow consumers to afford homes they can’t pay for upfront. This type of loan is among the loans with the lowest interest rates. A mortgage is tied to your home which means it can be foreclosed when you fail to pay. Mortgage loans are amortized so that the principal and interest payments are spread out over the loan period.

Personal Loans

Personal loans can be used for any personal needs. This makes them an attractive option for people with outstanding debts who want to reduce their interest rates by transferring balances. Personal loans can be used if you want to buy boats, renovate your rooms, pay your bills and other concerns. Most personal loans do not require collateral, so they rely on the integrity and the background of the loan applicant.

Loans for Veterans

The Department of Veteran Affairs provides lending programs for veterans and their families. This type of loan has lower interest rates than conventional loans. It also requires no down payment and allows for bad credit scores. Approximately, 21 million service members and veterans availed VA loans over the last seven decades.

Small Business Loans

To those entrepreneurs who want to start a small-scale business or expand their existing business, there is an available loan exclusive for them. The best source of this loan is the U.S. Small Business Administration which supports funds for this loan. It is important to help small businesses as they are essential to the national economy.

Payday Loans

Payday loans are short-term and carry a high-interest rate. Its targets are those who are employed and are receiving salaries. According to a study, 12 million Americans avail payday loans each year and spend about $7 billion on loan fees. That is why government discourages individuals to avail this kind of loan due to its high-interest rate.

Loans can be very helpful especially in emergency cases. But it is not recommendable to avail more than one type of loan, especially if you have existing balances and loans.

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