Even if you work hard and make good money, there are certain situations when you’ll need immediate access to cash that you don’t have. If non-payment isn’t an option, borrowing money may be your next move. Before you borrow money, it’s important to know which kind of loan can solve your financial problems, so you can access this emergency money as soon as possible and get the best payment terms.
Banks and online lending institutions are the two most common sources for loans. Other sources include credit unions and in-house lending institutions, as noted by August Funding. It’s best to locate a financial institution that can offer you the appropriate type of loan. However, qualifying and repaying that loan are two different problems.
Most of the loans on this list are unsecured loans with repayment terms. There are other types of loans, such as secured and variable-rate loans that may fit your needs. Finding the type of loan that works best for your financial situation depends on several factors such as your credit score and how much time you need to pay it back.
Unsecured Personal Loans
Personal loans are typically offered from banks and online lending companies. They can be used for debt consolidation, medical bills, school expenses, shopping expenses, and utility bills. Most personal loans are unsecured loans that are not supported by collateral, such as your car or home. This makes it riskier for lenders to offer a loan to an individual, which is why they have higher interest rates.
Approval is based on your credit score. Personal loans come with a wide variety of interest rates, ranging from 5% to 36%. Payment terms can range from one to seven years.
Secured Personal Loans
Secured personal loans are supported by collateral, which the lender can seize if you fail to make payments. Car loans and mortgages are two of the most common types of secured personal loans. However, there are a wide variety of secured personal loans offered by banks, credit unions, and online lenders. The rates are much lower than with unsecured personal loans since they’re not as risky to borrow.
Home Loan
Since buying a home is a major financial commitment, home loans make it easier to afford a home. A home loan, often referred to as a mortgage, can help you make that commitment. You’ll have to undergo a strict application process with your preferred lender. The financial institution uses your property as collateral as the loan is being paid back.
Car Loan
If you don’t have the funds to buy a car, then a car loan may be a good option. A car loan can make it easier to own a new vehicle. Since it’s considered as car financing, you’ll have to undergo a credit check. If you’re approved, then you can put down a payment towards your chosen vehicle. Then you can repay the loan in installments that can range from three to five years with interest.
Travel Loan
Some people have desires to travel the world but don’t have the money to cross off their bucket list. A travel loan can make it possible for people to become nomads. This is considered a personal loan and allows you to finance your dream vacation. You can use it to cover costs for accommodations, airfare, tours, transfers, and other travel expenses. Since this type of travel is often purely a want as opposed to a need, lending institutions like August Funding urge borrowers to exercise caution.
Gadget Loan
A gadget loan is considered a personal loan. It allows you to afford expensive electronic items such as cameras, desktop computers, gaming consoles, laptops, smartphones, and tablets. Most lenders offer gadget loans as long as you fit their application requirements. You’re expected to repay in installments with interest.
Appliance Loan
There are also personal loans that allow you to afford appliances. Appliance loans are similar to gadget loans in which you can repay in installments in addition to the interest. You can use these funds to purchase any type of appliance. Some appliance loans even allow you to purchase furniture.
Business Loan
If you have dreams of opening a business, then you should look into a small business loan, as suggested by August Funding. A business loan can be used to provide funding for operational costs, purchase supplies and startups. It can also be used to expand and grow your business. To qualify for a small business loan, you’ll need a positive credit score and personal credit. Other factors may include cash flow and time in the industry.
Payday Loan
A payday loan is an unsecured loan that should be avoided at all costs. People turn to them when they don’t have any other financial options. These loans must be repaid within the next payday, rather than monthly installments over several years. The loan amounts are a few hundred dollars but come with extremely high-interest rates.
These short-term loans are illegal in most states since they’re so risky to borrow. Most people apply for several payday loans that they can’t repay, which quickly puts them into debt. With interest rates on the rise, they’re required to repay thousands more than they borrowed.