Different types of loans
Loans can come in many shapes and forms
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There are many different kinds of loans and many kinds of subcategories of loans available in that. Here is a list of the different loans available:
- Personal Loans: provide funding for a broad variety of needs. The most versatile kind coming in multiple forms like wedding loan, debt consolidation loan, credit builder loan, medical loan, home improvement loan, and so on. Tradition personal loans are anywhere from 1-5 years long with APR ranging from 5%-35%. A decent credit score of 600+ is needed for most banks and collateral is only essential for secured, not unsecured loans.
- Student Loans: used to finance student higher education costs such as tuition, food, housing, books. Generally allowable uses only include school costs, many lenders can’t track exactly what you do with these loans. Payoff period is cogent longer than 10 years, options for debt forgiveness/relief are available, and the APR varies between federal and private loans and no credit requirements
- Mortgage Loans: housing loans, secured by the house purchased. This means mortgages allow you to stay in a house that you technically don't have enough money to outright purchase yourself, and until you pay off the debt, the house is the property of the bank issuing the mortgage loan. Many options are available including fixed-rate, ARM (adjustable), typical periods range from 5-30 years and APRs of 3%-6% and have similar credit requirements to personal loans
- Auto Loan: Similar to mortgage loans, the only main difference is the asset in question is a car as opposed to a house. The differences include payoff period from 2-4 years and no credit requirements
- Home Equity Loans: similar to personal loans, HEL can be used against the equity of the house to continue borrowing on something called revolving credit. Equity is the value of the house minus the mortgage debt on the house. These loans need credit scores of 650+, time periods similar to mortgage loans, and APRs from 4%-10%.
- Payday Loans: predatory loans given by individual lenders who don’t perform credit analysis or have any concrete requirements. These loans must be paid back (with interest), usually under $1,000 and APRs that can go as high as 400%, and are certainly never recommended owing to their risk factor