In this article, we will discuss Loans and their types. Anyone can take the loan. Everyone needs a loan. In this article, we will learn about how to take a loan and what are the types of loans.
How To Get A Loan?
Step 1: Determine your requirement
Step 2: Check loan eligibility
Step 3: Calculate monthly installments (EMI)
Step 4: Approach the bank/Finance Company
Step 5: Submit documents
Wait for funds to be sent to your account.
Different Types Of Loans
There are two types of loans to be taken, One is a Secured loan, and the other is an Unsecured Loan.
A secured loan is a loan given out by a financial institution wherein an asset is used as collateral or security for the loan. For example, you can use your house, gold, etc.
Example; Loan against property, Car loan
Unsecured loans, like the name suggests, is a loan that is not secured by collateral such as land, gold, etc. These loans are comparatively riskier to a lender and therefore associated with a high interest rate.
Example; Personal loans, Student loans
These loans are provided to meet the personal needs of the borrower. You can use the money from this type of loan in any way you see fit. You can pay off your previous debts, buy some expensive accessories for yourself, and plan a great trip with your family. The interest rates for this type of loan are on the higher side compared to the other types of loans.
Everybody dreams of owning their own house. However, buying a house needs a lot of money and it is not always possible to have that much money at once. Banks now offer home loans that can assist you in purchasing a property.
Title loans are another type of secured loan where you pledge the title for a vehicle you own—such as a car, truck or RV—as collateral.
This type of loan was very popular back in the days when the rates of gold were rising exponentially. Gold companies are facing losses due to falling rates of gold in recent times.
Vehicle loans help you fulfil your dream of owning a car or bike. Almost all banks provide this type of loan.
There are multiple loan schemes by banks to assist farmers and their needs. Such loans have very low-interest rates and help farmers to buy seeds, equipment for farming, tractors, insecticides etc. to generate a better yield.
A mortgage, also known as a home loan, allows you to borrow to finance what is likely to be the biggest purchase of your lifetime.
Student loans are meant to pay for tuition, fees, and living expenses at accredited schools. This means that you generally can’t use student loans to pay for specific types of education, such as coding boot camps or informal classes.
Auto loans are a type of secured loan that you can use to buy a vehicle with repayment terms between three to seven years. In this case, the collateral for the loan is the vehicle itself.
Payday loans are a type of short-term loan, usually lasting just until your next paycheck. These loans aren’t credit-based, so you don’t need good credit to qualify.
Debt Consolidation Loan:
These loans let you streamline your payments by applying for a new loan to pay off your other debts, therefore leaving you with only one monthly loan payment. If you have high-interest debts like credit cards or a high-interest personal loan, a debt consolidation loan can help you in two ways. First, you could qualify for a lower monthly payment. Second, you could qualify for lower rates, which can help you save money over the long term.
Recreational Vehicle (RV) Loan:
RV loans can either be unsecured or secured loans. Smaller RV loans are typically unsecured and work similarly to a personal loan while expensive, luxury RVs are secured—with the RV serving as collateral—and work more like an auto loan.
Pawnshop loans are another type of loan we usually don’t recommend because they’re very expensive, have small loan limits and require quick repayment. To get a pawnshop loan, you’ll bring something of value to the pawnbroker, such as a power tool, a piece of jewelry or a musical instrument.
Small business loan:
If you’re an entrepreneur or small business owner, you might borrow to fund your next big idea or simply maintain operations. Like with many of the other types of loans on this list, small businesses loans are available from banks, credit unions and online lenders.
Pool loans can help you fix up or improve your backyard playground. Top-notch personal loan lenders almost always lend for this borrowing purpose. You should also compare rates and terms with the local or national pool installation companies that offer financing options.
Family loans are informal loans that you get from family members (and sometimes friends). You may choose to turn to family if you can’t qualify for a traditional loan from a bank or lender, for example.
Family loans can be useful because you don’t need any credit to get one. If your family member trusts you and they have the financial means to do so, they can choose to give you the loan.
There are a lot of reasons people buy land. Maybe they want to build a house on it, harvest its natural resources or lease it out to other people and businesses. But land can be expensive, and that’s where a land loan can come in handy.
Boat loans are specifically designed to finance the purchase of a boat and are available through banks, credit unions and online lenders. The loans can either be unsecured or secured, with secured loans using your boat as collateral.
Home Equity Loan:
If you have equity in your home, you might be able to use a home equity loan, also known as a second mortgage. The equity you have in your home—the portion of your home that you own, and not the bank—secures the loan. You can typically borrow up to 85% of your home’s equity, which is paid out as a lump sum amount and repaid over five to 30 years.
Credit-builder loans are small, short-term loans that are taken out to help you build credit. Since they’re marketed toward people with zero or limited credit, you don’t need good credit to qualify, unlike regular loans.