Loans are a great way for you to utilize your credit score and a small down payment to make large purchases, investments, etc. For example, auto loans allow you to put a small amount down to secure the loan and drive off the lot with a new car. Each loan or kredit type has its parameters and requirements. Below are 5 of the most common loan types to help you decide which is right for you.
Auto Loans
This has to be the most common loan that people take out. As mentioned before, an auto loan allows you to buy a car without paying the full amount. This is similar to the way that other loans operate, like a home loan. If you have a bad credit score, then you can expect a high-interest rate.
Home loans
A home loan follows similar principles of an auto loan. You put down a small amount to secure the loan and you get a home in return. Unlike auto loans, home loans come in a variety of different types for different buyers. Like other loans, your credit score will determine certain factors of the loan.
Debt consolidation loan
So you’ve racked up a good amount of debt and keeping track of it is a chore. This is where a debt consolidation loan can pay off. Many banks offer debt consolidation as a way for you to keep track of debt and pay it off.
Small business loans
This is where entrepreneurs go to fund their dreams. If you need to finance equipment for your new office or restaurant, then this is where you go. A small business loan will typically require a business plan and some sort of guarantee that you’ll pay the money back. The terms do vary but you can expect to pay the loan back within 5 to 25 years.
Payday loan
A payday loan is like a cash advance on your paycheck. This is an option that should be limited for emergencies and not because you want to go out that weekend. The interest rates are typically very high. Most payday loans require you to pay a fee per dollar amount borrowed, like 15 dollars per 100 dollars. A payday loan typically requires an active bank account and a government ID.
With all of these options, it can be tempting to take out a few of these loans. This can be a mistake and a roadmap to a debt consolidation loan. Loans should be viewed as a situation appropriate. If you really need that new car, then go out and secure that auto loan. Just don’t get stuck with a high-interest rate.
