What Are The Different Types Of Loans?

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When you are looking to get a loan, there are a variety of different types of loans out there. The type of loan you get depends on what you need the loan for. We have put together a list of some of the major types of loans for you. Keep reading to learn what you need to know about the different types of loans.

Credit Cards
While most people don't realize that a credit card is a loan, it is that. A high percentage of Americans have credit cards. Credit cards can be easy to get but the easier they are to get, the more terms they will typically come with. For example, easier to get credit cards have higher interest rates. This includes starter credit cards.

Properly maintaining your credit card can help you to build a credit score to make you eligible for a better loan or credit card.

There are a variety of credit cards available, from traditional credit cards to down payment credit cards, to store credit cards. Each type of credit card has its own benefits. Look into the various types of credit cards to determine which kind is right for your needs.

Car Loan
Car loans are specifically designed to purchase a vehicle. They are tied directly to the car. In most cases, you will have to put a certain amount of money forward as a down payment. Your down payment will determine how much you need to finance and how large your monthly payment will be. If you don't make your payments, you face losing your car via repossession.

Auto loans can come either from the bank or from a car dealer directly. Some car dealers can assist you in finding a loan from a variety of different sources and can filter out the best deals. Some auto loans will have extremely low interest while those who have never had an auto loan might experience higher than normal.

Mortgage
If you are looking to buy a house that you can't purchase upfront, then you take out a mortgage. Mortgages are similar to an auto loan but for a house. For those that don't pay their mortgage, they risk going into foreclosure.

Because of the enormous cost of buying a home, the interest rates on a mortgage are some of the lowest of all loans out there.

Personal Loan
A personal loan is a type of loan that doesn't have a designated purpose. It isn't for buying a car or a house, for example. The terms for a personal loan depend on your credit history as well as your payment history. For people who already have outstanding debts, they can typically get a better interest rate by taking out a personal loan and combining all of their debt. The average interest rate for a personal loan is between 10 and 12 percent.

Cash Advance
A cash advance is a type of loan that you can take out from your credit card. It is short term. You go to an ATM or bank and receive cash instead of using your credit card at a store. Credit card companies typically have a different interest rate for cash advances that is higher than a credit card purchase.

You can get the same time of loan by writing a check to a payday company.

Payday Loan
For those who need a lot of money quickly, they can opt to get a payday loan. These loans are designed to make getting money from your next paycheck possible. However, they are typically extremely high interest. Government financial staff high advise against using this type of loan because of the high interest and the cost of taking such a loan. They should only be used in emergencies where no other option exists.

Now that you know the major times of loans you can determine what kind of loan you need to meet your needs. There is a lot more to learn about loans so feel free to read more about each kind in depth. Making any financial decisions is not a small thing.

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