How much money do you have in your savings account? Most people would cringe or squirm at such a question. Did you know that the average amount a typical American household has in a bank or credit union is $8,863?
Whether or not this number feels low or high to you will be dependent on your current financial situation. As saving up over time for larger purchases is good practice, you will most likely need financial assistance of some sort.
Different types of loans exist for this reason. Are you aware of what’s out there though? How does your credit score come into play?
We answer all your loan questions for you. Read our post about the subject below.
Off all the different types of loans, a personal loan is the broadest category. The repayment period is generally between 24 and 84 months and can be used for almost anything (not college education or illegal uses).
Common reasons people use personal loans are for vacations, weddings, emergencies, changing cities, expensive electronics, home renovations, medical treatment, etc.
Applying for a personal loan isn’t difficult and can be done online or with your bank, credit union, or online lender. Having a good credit score will open you open to a wider variety of personal loans with low-interest rates and a bevy of repayment choices.
Secured personal loans are backed by collateral. If you don’t repay the full loan amount, a lender can take it back.
An unsecured loan doesn’t require collateral and is backed by your signature. You have to have a decent credit score since the lender is taking a bigger risk. They also tend to be more expensive as a result too.
Auto loans are loans (secured) you’d use to buy a vehicle and have repayment terms of three to seven years. The collateral with an auto loan is the vehicle itself. Non-payment will result in the lender repossessing the vehicle.
Banks, credit unions, and online lenders will usually allow you to get auto loans.
Some dealerships will have a financing department that will work with partner lenders in finding you the best loan available. Whereas other dealerships will give you the loan themselves (typically more expensive).
Tuition, fees, and living expenses are all things you’d use student loans for. Certain types of education won’t qualify here (informal classes, coding bootcamp, etc.)
Federal student loans are provided when you fill out the Free Application for Federal Student Aid (FAFSA) and with help of your school’s financial aid department. You will pay slightly higher interest rates but will come with more protection and benefits.
If you’d like to apply for private student loans, you can’t have bad credit. With a good credit score, you’ll have better rates yet the caveat is that you will have less protection and fewer benefits.
There are many different types of loans available in this category since they help you finance the purchase of a home. Common mortgage lenders are banks like triadbank.com and credit unions.
Government-backed loan programs are available to certain groups such as rural/low-income homebuyers (USDA), low to moderate-income levels (FHA), and active-duty service members and veterans (VA).
Explore the Different Types of Loans at Your Disposal
As you can see, there are different types of loans depending on your needs. If you need one, we encourage you to continue your research and make an informed decision.
The good news is that you’re already in the right place. To learn more about business, finances, and the like, check out our blog.