Need a Loan? Do Your Research

A loan is a credit facility that you get either from a bank or a financial institution that gets repaid on a future date with a principal interest attached. There are various types of loans in the market, and each comes with different advantages and disadvantages.

You might be wondering, “What is a jumbo loan?” Loans are some of the solutions that the majority use to offset their situation. Still, it’s important to note that failure to repay your loan in the stipulated timelines might lead to unnecessary trouble.

It’s essential to understand some terms associated with a loan, and the basic terms you will encounter include loan principal and loan interest. The loan principle refers to the amount of money you forward as a loan or credit facility. On the other hand, the loan interest is the amount charged on the money borrowed upon receiving the loan.

There are mainly two types of loans: unsecured and secured loans. A secured loan requires the applicant to pledge collateral or another asset to pay back the loan as a surety. If they fail to honor the agreement and pay the loan, the bank or financial institution is obligated to sell the property or asset to offset their balance. The unsecured loan is what most borrowers prefer but is relatively uncommon in the market. Under this type of loan, in a situation where the borrower defaults or fails to repay the loan, the lender does not have the right to take over the ownership of any property belonging to the borrower. No collateral gets attached to this type of credit facility.

Types of Loans

There are various types of credit facilities or loans that one can access in the industry. Some of these loans include the following:

Personal Loans

Personal is the most accessible and most common type of loan. You can get this type of facility from any bank or financial institution offering loans. This loan provider does not dictate how the borrower will spend this type of loan which is an advantage compared to other loans. It’s important to note that personal loans fall under the unsecured loan category. Personal loans come with several benefits which include the following.

Advantages

• Personal loans are relatively easy to access, provided the borrower has a good credit score.
• Secondly, the bank does not dictate how one will use the money forwarded to them with personal loans.

Similar to other credit facilities, Personal loans also come with many disadvantages on their downside. The following are some of the disadvantages associated with personal loans.

Disadvantages

• Personal loans are usually advanced in small amounts that exceed approximately $5000.
• Secondly, personal loans usually attract higher interest rates compared to secured loans.
• Lastly, the personal loans repayment period is shorter compared to secured loans.

Cash Advance Loans

This type of loan is usually available to credit cardholders who need quick cash. It’s available from your bank or payday financial institutions.

Advantages

• Cash advance loans are easier to get than unsecured and other secured loans.
• Cash advance loans are the best alternatives to access when one does not have other available options to get money.

Disadvantage

• Cash advance loans usually attract high-interest rates compared to other credit facilities.
• Secondly, the amount advanced by this type of loan is approximately not more than $1000.
• Student Loans

Student loans are some of the most popular and great ways to finance your college education. Students loans come with many advantages and benefits to students advanced those facilities compared to other types of loans. The following are some of the benefits associated with student loans.

Advantages

• Students loans come with some of the most reasonable interest rates.
• Its repayment period is quite long compared to other unsecured loans.

Disadvantage

Student loans usually can add up to over $100,000 over a short period of only four years or the by the time one gets done with their college.

Mortgage Loans

Mortgage loans are types of loans that one access to finance their real estate acquisition. It’s classified under secured loan as your property acts as collateral.

One advantage of accessing a mortgage loan is that the repayment period is usually 15 to 30 years, and its interest rate is generally relatively low.

Home Equity Loans

This credit facility gets forwarded to homeowners who use their houses and homes as security or equity. The lender usually offers the difference between the property appraisal value and the amount owed to the mortgage company as line credit. This loan can get used in home improvements or debt consolidation. Its interest rate is relatively low.

A loan can be helpful to a consumer. Make sure you do your research and find the one that will benefit you the most.