Every person has their own bunch of personal needs and according to those requirements; everyone has a type of loan that suits them. Someone might want it for their personal needs whereas someone else might want a loan for funding or starting their very own business. But when you step into the world of loans, you are usually shaken by the options that you have access to. Which one is the best for you? You probably never had so many options right at your hand and never knew about the variety of loans too.
Here, we will be discussing the basic types of loans which are accessible. Through this, you will understand which type of it is better or best for you, in the light of your needs.
TYPES OF LOANS
Every different loan has a different procedure and traits. These slight or major differences and characteristics make each loan suitable for different financial needs. Here is a list of the most commonly applied for loans and a quick yet detailed insight to them.
- Personal Loans:
Personal loans are the most utilized type of loan and these are offered by every bank. Ask your bank about it and they will be offering this one too. There is not any specific need for this loan and one can use the proceeded money for any purpose. These have a money range from hundreds to thousand dollars, depending on the need of the applicant. Personal loans are termed as unsecured loans. The most important demand by the lender or bank in the case of personal loans is proper income verification. This is important so that the lending organization is confirmed of the fact that you are capable of repaying the loan. The application or form for personal loans is usually one or two page long only. Moreover, the approval or denial of loan is confirmed with a few days. Thus, there is not long procedure involved and the waiting process is also small.
But as everything has a downside to it, personal loans have one too. These loans have high interest rates. A 24 month loan has 10% interest rate at the moment and they can get higher with the passage of time. Moreover, you cannot extend the repayment period more than 2 years. This is the maximum time limit that the borrower gets for repayment. Therefore, this money is not good to rely upon for long term projects at all. Thus, if you are looking to buy small amount of money, which is easily going to get repaid within 2 years or even less, then Northcash personal loans are great to opt for. Otherwise, for larger amounts, this is not a great choice to make.
- Home Equity Loans:
This loan is taken by a homeowner against the value of their home. If you have to find out the home equity that is available for a loan than you have to find out the difference between your home’s market value and the amount that is still owing on the mortgage. The money that you are granted through this loan can be used for any purpose. The best part about home equity is that they have very affordable interest rates. The terms of this loan also ranges from 12 to 15 years which makes their repayment easier. Thus, if you are looking for a large amount of money then this type of loan is greatly attractive for you. Another attractive feature for home equity loans is that the interest rate is tax deductible.
But if the borrower is not good at repaying, then this great loan can turn out to be a mess for them. If only person is earning in the home then this type of loan is a bad option to choose. This makes the repayment tough for that person and one can easily put their home on the hilt of losing it. Also if the person dies, the ability to keep up with the repayment dies with him/her and the family can lose their home easily. Make sure that you have enough income to keep repaying and you don’t delay the repayment often.
- Small Business Loans:
Small business Administration, better famous as SBA is famous for bringing small business loans for people who dream of beginning their own business but don’t have enough cash to fund it. Your local bank might offer this loan to you too but applying for it directly through SBA is the best. This loan requires a personal guarantee from the borrower that even if their business fails, they will make the repayments on time.
Small business loans have a time span of 5-25 years for repayment. The interest rate amount is not fixed on these loans. Every institution has own requirements; it varies. A lot of organizations change their interest rates with the passage of time. You can however argue on the changes and refuse to let them implement it on your repayment. You can stick to the old interest rate that was offered to you. It is best to discuss this before applying for the loan. If the company does not agree on this, it is better to try another organization because changes in interest rates do happen every now and then.
There are definitely subcategories and other types of loans that exist in the industry. However, these are the most basic 3 types of loans that exist. Mostly people opt for personal loans and small business loans. So you now have an idea about the various funding options that are accessible for you. Which one suits your needs at the best? Choose one and set up your business or have your fairytale destination wedding that you have always dreamt off. Learn to live your dreams and make them happen, instead of giving up on them. The moments and dreams are worth it and these funding options make it possible for you to fly high!