Common Types of Loans

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Common Types of Loans
People sometimes wonder about common types of loans, especially with all of the different types of loans available.

There are many common types of loans that may fall into the same categories, as well as some common types of loans that are only different in one or two small ways.

Below are the descriptions for several common types of loans, including some of the factors that may restrict who is eligible for the loan and how much interest different individuals might have to pay for the loan.

Of course, this doesn't cover all of the loans that are offered... only the loans that you are most likely to encounter.

Secured and Unsecured Loans

Most if not all common types of loans fall into one of two categories... secured loans and unsecured loans.

Secured loans are those loans that use some object of value, which is referred to as collateral, as a guarantee of repayment and a method of offering lower interest rates.

Unsecured loans, on the other hand, require no collateral but almost always have a higher interest rate than secured loans.

Both of these types of loans may be affected by your credit rating, and secured loans may be affected by the value and type of your collateral.

Student Loans

Student loans are one of the common types of loans that provide money for a person to continue their education. These loans are often supported by the government, allowing them to be unsecured loans while maintaining lower interest rates. Many student loans have a deferred repayment option, allowing the student to put off repaying the loans until after they've finished school.

Auto Financing

Another of the more common types of loans is auto financing, which is a secured loan that is used to purchase a car, truck, or other vehicle. The vehicle that is purchased serves as the collateral for the loan, allowing a person to purchase the vehicle without having to put up additional collateral to secure the loan. Since most vehicles are higher value items, auto financing is often available to individuals of a variety of credit ratings.

Mortgage Loans

Mortgage loans are loans that are used to purchase or refinance a house or real estate, and are one of the most common types of loans. Much like auto financing, mortgage loans require no additional collateral since the purchased property serves as the collateral to secure the loan.

Mortgage loans tend to vary in interest rates and repayment terms, with common repayment options sometimes lasting as long as 30 years for larger mortgages. These loans can be gotten from a variety of lenders, including standard banks, finance companies, and online lenders.

Homeowner Loans

Very similar to mortgages, homeowner loans are loans that are taken using a house or other piece of real estate as collateral.

The major difference between homeowner loans and mortgage loans is that homeowner loans are taken out on property that the borrower already owns, and uses equity (which is the portion of the property's value that's already been paid for) as a major determining factor in interest rates and other loan terms.

Most individuals who own a home or real estate can qualify for homeowner loans (with sufficient equity), regardless of their credit rating.

Like mortgage loans, homeowner loans can be obtained from traditional banks, finance companies, online lending services, and other lenders... a growing trend in recent years, however, is for homeowner loans to be gotten via online services because of the increased convenience and anonymity of online lenders.

You may freely reprint this article provided the following author's biography (including the live URL link) remains intact:

About The Author

John Mussi is the founder of Direct Online Loans who help homeowners find the best available loans via the http://www.directonlineloans.co.uk website.

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Do Payday Loans Deserve a Bad Rap

We have all heard the stories about cash advance lenders charging their customers excessive interest fees. It is true that most payday loans have the highest interest rates compared to any other type of loan. As unfair as this may sound, payday loans do serve a purpose and there are many people who use them to their advantage.

The majority of people who need the assistance of a payday loan have poor credit and cannot obtain a loan by going through the traditional routes. Banks, credit unions and other lending institutions require for their customers to have a credit score of a certain level that a lot of people just simply do not have. Cash advance lenders have reasons to justify the high interest rates that they charge. Where else can you go and receive cash on the spot? Lending cash to people with questionable credit is a big risk to the lender. They have to make up for this risk and for having a large amount of cash on sight by charging higher interest rates on their loans.

Critics of the payday loan say that the short terms of the loan and the high interest fees can cause people to become trapped in a never ending cycle of payday loans. In some circumstances this case may be true. It can turn into a bad situation when people take out a cash advance loan that they know they cannot payback in addition to leaving enough money left over for other bills and living expenses with their next paycheck. In this situation, the person who is in need of a cash advance is better off to ask a friend or a relative for a loan who will not charge them interest and will be more lenient on the payback terms.

In response to the allegations that the problem with payday loans lies with the lender instead of the borrower, cash advance loans are not meant to be a permanent solution to cash flow problems. They are intended to be used only for unexpected expenses and in the case of an emergency.

If someone finds themselves on the payday loan merry-go-round, they more than likely need to step back and asses their budget. If they do not have a budget, that itself may be a large part of the problem. If someone cannot afford to pay all of their bills and necessities after cutting out all unnecessary expenses and going on a budget, they may want to seek higher paying employment or look into debt management solutions.

Even if you have good credit, there are benefits to using a payday loan. The limit on a cash advance loan tends to be much lower than the limit for a traditional loan. Many circumstances call for the borrower to only need $500 - $1,000. They can easily obtain the money through a cash advance without the hassle of an application, a credit check and waiting for approval. Many online websites such as Easy Approval Personal Loans offer both unsecured personal loans and payday loans so you can easily find the loan that best suits your needs.

In conclusion, only you can decide if a payday loan is the best option best for your situation. There are pros and cons to every situation. By being responsible with your finances and educating yourself on all of the possible loan options available to you, you will have the best chance of coming out on top.

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Note: This article may be freely reproduced as long as the authors bio paragraph at the bottom of this article is included, the article is published "as is" (unedited) and all URL's are made active hyperlinks with no syntax changes. -------------------------

This article was written by Beth Pardue who has over 10 years of experience in the financial industry assisting clients with assorted financial needs. To learn more about your personal loan options or to apply for a personal loan online please visit: http://www.easy-approval-personal-loans.com


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3. Secured Loans Overview
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Common Types of Loans
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