Types of Loan
Loan types vary because each loan has a specific intended use. They can vary by length of time, by how interest rates are calculated, by when payments are due and by a number of other variables.
Personal Loan -- A personal loan is a type of unsecured loan and helps you meet your current financial needs.
You don't usually need to pledge any security or collateral while availing a personal loan and your lender provides you with the flexibility to use the funds as per your need. You can use the fund from this loan for any legitimate financial need. Like any other loan you must repay it accordance to the agreed terms with the bank. Normally this can include a few months to a few years in easy equated monthly installments.
Student Loans -- Student loans are offered to college students and their families to help cover the cost of higher education. There are two main types: federal student loans and private student loans. Federally funded loans are better, as they typically come with lower interest rates and more borrower-friendly repayment terms.
Mortgages -- Mortgages are loans distributed by banks to allow consumers to buy homes they can’t pay for upfront. A mortgage is tied to your home, meaning you risk foreclosure if you fall behind on payments. Mortgages have among the lowest interest rates of all loans.
Auto Loans -- Like mortgages, auto loans are tied to your property. They can help you afford a vehicle, but you risk losing the car if you miss payments. This type of loan may be distributed by a bank or by the car dealership directly but you should understand that while loans from the dealership may be more convenient, they often carry higher interest rates and ultimately cost more overall.
Loans for Veterans -- The Department of Veterans Affairs (VA) has lending programs available to veterans and their families. With a VA-backed home loan, money does not come directly from the administration. Instead, the VA acts as a co-signer and effectively vouches for you, helping you earn higher loan amounts with lower interest rates.
Small Business Loan -- Small business loans are granted to entrepreneurs and aspiring entrepreneurs to help them start or expand a business. The best source of small business loans is the U.S. Small Business Administration (SBA), which offers a variety of options depending on each business’s needs.
Payday Loans -- Payday loans are short-term, high-interest loans designed to bridge the gap from one paycheck to the next, used predominantly by repeat borrowers living paycheck to paycheck. The government strongly discourages consumers from taking out payday loans because of their high costs and interest rates.
Debt Consolidation Loans -- A consolidation loan is meant to simplify your finances. Simply put, a consolidation loan pays off all or several of your outstanding debts, particularly credit card debt. It means fewer monthly payments and lower interest rates. Consolidation loans are typically in the form of second mortgages or personal loans.