Business & Finance

4 Types of Loans

Taking out a loan is often necessary when making a large purchase or when you need cash quickly. Loans vary greatly in their terms and interest rates charged, so shop wisely when looking to obtain a loan. A wide variety of loans exist for all different situations and varieties of purchases. Here are four types of loans that can be taken out when needed. 

1. Student Loans

Student loans consist of both federal and private loans that are meant to be used in obtaining a degree at a college or university. Student loans do need to be repaid, but they sometimes come with grace periods while you are still in school and may have lower interest rates than most other types of loans. Balance how much you take out in student loans with how much you expect to earn after completion of the degree. There are several kinds of repayment plans for student loans, including:

  • Graduated repayment plans
  • Extended repayment plans
  • Pay as you earn repayment plans
  • Income-based repayment plans

Consult the financial aid professionals at your school when taking out a student loan. 

2. Payday Loans

Payday loans Crestview FL are short-term loans that generally need to be paid off quickly. Payday loan applications are quick, which makes this a good option for someone who needs cash fast for any number of reasons. Payday loans also do not require the borrower to put up any kind of collateral. 

3. Auto Loans

Like student loans, auto loans are given for a particular purpose, in this case for buying a new or used car. The collateral for these loans is the car itself, and the loan is paid back with interest within a time period that is agreed upon in advance. The amount of the car loan depends on how large of a down payment you can make, while the interest rate depends on factors such as credit score, down payment and the type of vehicle being purchased. 

4. Home Equity Loans

As the name suggests, a home equity loan involves money that is used to purchase a home and uses the equity in the house as collateral. The amount that one can borrow depends on factors such as the combined loan-to-value ratio on the appraised worth of the home. You can obtain a home equity loan from many sources including a bank or credit union

If you need to borrow money, consider the benefits, terms and risks of these four types of loans.