Personal loan
Personal loans are a type of debt that you can get from a bank, credit union, or online lender. The money you borrow is given to you in one set amount. They have set principal amounts and interest rates that don’t change.
Personal loans come with extra fees from some lenders. An application fee is one example. This is a one-time fee you pay when you start your loan.
You won’t need collateral to get a personal loan because they are usually unprotected loans. You need a good credit score and a credit background that has been stable. But some lenders will give you a loan with collateral if you have bad credit or want to get lower rates.
Most of the time, personal loans can be used for anything. A personal loan is often taken out for the following reasons:
- Getting a new loan or paying off credit card debt
- Projects to make your home better
- Health care costs
- On the road
- Costs of a wedding or honeymoon
- Costs of emergencies
Debt consolidation loan
By putting all of your debt into one loan, a debt consolidation loan can help you pay off any loans you already have. This could be good for some users because it could help them save money on interest, keep track of their monthly payments better, and pay off their debts more quickly.
For the most part, debt consolidation loans are secured and have set interest rates because they are a type of personal loan. There are, however, pros and cons to debt reduction that you should think about.
Some people with bad credit might not want to get a debt consolidation loan because the APR might be too high. Use a debt consolidation calculator to see if this type of loan is right for you by showing you how much money you could save.
Home loan
It’s possible that a mortgage loan will be the biggest loan you ever take out. It lets you buy a house and build equity. Mortgage loans come in a lot of different forms, such as conventional, FHA, and VA. Which one you get will rely on your income and credit history.
More than one mortgage loan term can be 10, 15, 20, or 30 years. You may also find loans with longer or shorter terms. The interest rates on them can be set or change over time. Mortgages are also protected loans, which means that the house you buy will be used as security while you pay back the loan. Because of this, if you can’t pay your mortgage, you might lose your house.
Home equity loan
A home equity loan, which is also sometimes called a “second mortgage,” lets people use the wealth they’ve built up in their home since they bought it. Most lenders will let you borrow up to 85% of the home’s value, but this can change from lender to lender. You can borrow up to 85% of the value of your house.
Home equity loans are backed by your home, just like a mortgage, so you’ll need to make sure you pay them back on time. You may need a low debt-to-income ratio, good credit, and at least 20% value in your home in order to get a home equity loan.
Student loan
Student loans are a way for people who want to go to college or university to pay for it. When you apply for a student loan, you may need to use a trusted loved one, like a parent, as a cosigner. This is because some young people who want to go to college don’t have a lot of credit history.
Most of the time, these loans don’t require collateral and can be used to pay for things like school, room and board, and books. The interest rates on them can be set or change over time.
Public and private student loans are the two types of this kind of debt. The first two are started by private companies, as the names suggest, while the third is paid for by the central government.
Auto loan
When you get an auto loan, you can buy a new or used car, which could be anything from a motorcycle to an RV. Most of the time, the car you bought is used as collateral for an auto loan. You can pay back a car loan over 12 to 84 months with a set rate and term.
Most auto loans require that you use the car you want to buy as security. However, some lenders offer unsecured car loans, but you’ll need good to excellent credit to get them. Use a car loan calculator to get an idea of how much you can borrow and how much you can afford to pay each month.
Small business loan
A small business loan is a type of credit that helps businesspeople get the money they need to grow their businesses. This could mean taking out a loan to buy tools, stock, or even pay employees. Some companies even offer SBA loans, which are backed by the Small Business Administration (SBA) and can be as much as $5 million.
For business loans, security is often needed, but it’s not the only thing lenders look at. When you apply for a business loan, lenders will look at your cash flow, debt-to-equity ratio, working capital, and business credit score. They will also ask how long you’ve had the business.
Credit builder loan
As the name suggests, credit builder loans are a type of loan that helps people with little or no credit show lenders that they can be trusted as clients. Most of the time, these loans are small, between $300 and $1,000. They work a little differently than regular loans.
The loan amount is kept in a protected bank account that you can only access after you pay off the loan. You don’t get a lump sum of cash or an asset right away. This is how your loan works as collateral. It can take time to build credit from scratch, but the promise of getting the loan money back after you pay it back may be enough to get some people to pay it back.
You might have better luck finding one at a small bank, like a credit union, because credit builder loans aren’t very popular.
Payday loan
The interest rates on payday loans are so high (up to 400%) that they are seen as predatory lending. The loans are usually for up to $500. Payday loans have short terms—two to four weeks—so it’s easy for people to get stuck in a loop of debt. They may need to take out more loans to pay off their first payday debt.
Most of the time, payday loans don’t check your credit, which could make them appealing to people with bad credit. Instead of asking for a traditional loan if you can’t get one, try applying for a payday alternative loan at a credit union or a loan with a cosigner.
