Learn More About 5 Different Types of Loans You Might Use

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different types of loans

Are you in need of some capital?

It’s safe to say that most of us could use a little extra cash from time to time.

But if you need money to cover something important like funding education, buying a car, getting a new roof, or paying medical bills, then it could be time to consider a loan.

There are many different types of loans though. So it’s important to understand the differences.

We’ll look at five of the most popular types of loans.

1. Auto Loans

If you really need a vehicle but don’t the upfront capital, an auto loan from a bank or car dealership can help get you into a car quickly.

You’ll need to remember though that when you purchase a car with an auto loan, you’re not only paying the purchase price but the finance charge as well. So for instance, if you’re looking at a $15,000 car, you may easily pay an additional $2,800 in finance charges.

That would make your total cost $17,800.

Also, if you miss too many payments, that car can be repossessed. So spend wisely.

2. Student Loans

The cost of higher education in the United States is way out of reach for most people.

So it’s pretty rare to find someone in college who doesn’t have at least some form of student loan to help defray the cost of tuition, books, and housing.

Generally speaking, federal student loans have the lowest interest rates and better repayment terms. But if for some reason you don’t qualify for a federal loan, you could always get a private student loan.

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3. Home Equity Loans

Owning a home is a money pit. Just when you take care of one responsibility, another appears.

If you currently have equity in your home, you can apply for a home equity loan or home equity line of credit (also known as a HELOC). The former has a fixed interest rate and requires monthly payments, while the latter has variable rates and a more flexible payment schedule.

Both of these loans use your home as a source of collateral and are typically used for home renovations. However, they can be used for any number of other expenses and at a considerably lower interest rate than other loans.

4. Small Business Loans

Having a great idea, drive, and entrepreneurial spirit is a great foundation for starting your own business. But obviously you need money too.

Small business loans were developed to help entrepreneurs either start a small business or expand their current small business. There are a variety of options depending on your individual needs.

5. Personal Loans

As you’ve probably noticed, finding the right loan option depends on that for which you intend to use the money.

A personal loan, however, can be used to cover expenses with no designated purpose. They can be used to consolidate high-interest credit card debt, paying off medical bills, or just giving yourself a long-deserved vacation.

Like all other loans, the terms of a personal loan will depend on your credit history. So just be sure you can pay it off accordingly to keep your credit in good shape.

Research Different Types of Loans

Now that you know some of the different types of loans, you can begin to do a little exploration on your own of what will be right for you.

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And in the meantime, keep checking back with us for other great tips and advice on living your best life.

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