Five Common Types of Loans: Which One Is Right for You?

Five Common Types of Loans: Which One Is Right for You?

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Choosing to take out a loan can be a daunting task. Sometimes you don’t have the money upfront to make an investment in something like your education, a new house, or a new car, but you need to in order to continue your journey in life, which is where taking out a loan comes into play.

While the thought of taking out a loan and owing money may not sound like a much of a deal, taking out a necessary loan can be just what you need to get the ball rolling towards future success. Not to mention that when you take out a reputable loan, you’ll have manageable payments to make each month until it’s all paid off, which makes things much easier and less stressful for you.

If you’ve decided that you want to take out a loan to help you kickstart a project, work towards a goal, or simply provide yourself with what you need, you’ll want to make sure you know where to begin. Read on to learn more about five common types of loans you can get loan application for.

Two Types of Credit

Before we get into types of loans, there are actually two types of credit that fund loans. Open-ended credit can be used repeatedly for purchases that will be paid back monthly, and paying the full amount due every month is not required.

Closed-end credit is used to finance a specific purpose for a specific period of time. They also are known as instalment loans, and are often associated with auto loans and mortgages.

Student Loans

Student loans are offered to college students to help them pay for courses in higher education. Generally, there are two types of student loans: federal and private. Federal loans are often better because they usually come with low or no interest rates and offer superior repayment terms.

Mortgages

Mortgages are loans that are designed to help you pay for a home that you can’t pay for up front. Payments are typically monthly for this kind of loan.

Auto Loans

Like mortgage loans, auto loans are tied to your property. They are designed to help you afford a vehicle, but they require you to make monthly payments in order to complete the full payoff of your loan. You can find the best deal for an auto loan by searching for low interest rates and fair payment schedules.

Business Loans

Business loans are typically granted to small business entrepreneurs to give their company or idea the kickstart they need to continue to seek future growth and success.

Personal Loans

Last but not least, you may want to consider taking out a person loan. Personal loans give you the flexibility to use the money you take out for anything you want. However, these type of loans often come with higher interest rates when compared to other types of loans such as auto loans or mortgages.