Taking out a loan is seriously scary stuff. Not only does it mean pretty much signing your life away and committing yourself to a lengthy and daunting repayment schedule, but it also means having to try and understand tons of jargon, hoping you get accepted when you have a bad credit score and generally facing up to some very grown up conversations and some expensive decisions.
What doesn’t help is just how many different types of loan that are out there, and with so much on offer you can have a tough time trying to narrow down the best deals and setups for you. Here we will look at some of the most common types of loan, and help you decide if any of them are right for your purposes.
General Bank Loan
A general loan will usually come from a bank and is an all-purpose loan for you to do with as you please. The precise terms and conditions of this loan – such as the APR, the fees, and the repayment schedule will all depend on how much you take out, and on how you go about paying it back. Generally though these loans are valued in the thousands, require an assessment process and are paid back over a series of months or years.
There are a number of specific loans that are designed to be used for particular purchases. Car loans for instance are used to pay for cars, while mortgages are used to pay for properties. Some of these loans can come from businesses other than banks – such as dedicated car loan companies and this may help you save more money.
Buying On Finance
Buying on finance means you buy a car or a computer, but only pay a small amount up front and commit to pay the rest in monthly instalments (plus interest of course). This will often be cheaper than a loan, because the company gets more out of the arrangement, but it’s also riskier in some ways for big purchases as there’s no way to restructure this agreement.
Bad Credit Loan
Credit ratings represent how effectively we’ve been able to pay off debt in the past and this tells future loans companies whether to lend to us or not. Bad credit loans exist for those of us who have low credit ratings and can’t get loans from banks or companies otherwise. These can also be called ‘guaranteed loans’.
Another way of getting the lenders to have more faith in you is to take out a secured loan. This means that you use your property as collateral – in other words if you can’t pay for the loan, the lender will seize your property and use that to make back the money. This is a good option but only if you’re sure you can pay the loan back.
When you need money fast, payday loans are smaller loans that can be paid into your account sometimes in as little as ten minutes. These loans have very high interest rates though, so they aren’t for long term use. They are so called because they can be used to ‘tide you over’ until your pay day and pay any pressing bills.
John Lowrie is a successful financial journalist. When he is not busy working, he likes partying with his friends. He likes blogging in his spare time. He writes articles on topics related to debts, pay day loans, banking and money making. You can follow John on Twitter.