Say you want to venture into business, and you lack the capital to start. Do you give up, or can you consolidate funds and repay later? If you are thinking about letting your dream go because of lacking some cash, hold up!
You probably heard of loans, but lacked a proper understanding of what they are and how they work. If you are interested, keep reading to find out more about the various types of loans, with help from https://allthebestloans.com/.
What is a Loan?
According to the Oxford Language dictionary, a loan is sum of money that you borrow, with the hopes of paying them back later, but with interest.
Types of Loans
Different financing organizations offer different types of loans to their clients depending on the intended purpose and payment duration.
These different types of loans include:
1. Credit Card Loans
If you enjoy shopping, then you might have a credit card or two for your endeavors. But do you understand how credit cards work?
Having a credit card at hand is an opportunity to take out a loan with your bank. But this time, you don’t need collateral. So, any time you swipe your card, you borrow some cash from your bank.
If you pay the whole amount immediately, then there are no extra charges credited to your account. However, if there is a balance, you will receive monthly charges, called interest, until you pay off the total amount.
Average credit card interest rates lie between 16% and 17%, according to the Federal Reserve.
2. Personal Loans
Most main street and online banks offer personal loans. And all you need for these loans is proof of some form of income or assets worth around the borrowed amount.
Once you receive the cash, you can use it for virtually anything, from settling bills, going on a trip, or investing.
The amount ranges from a few hundred dollars to thousands of thousands to be repaid in a few months to a maximum of about five years.
The interest rates on these loans depend on your credit score. The better it is, the lower the interest rates. If you have a poor credit score, you might have to pay up to thrice the borrowed amount.
3. Home-equity Loans
Say you bought a home on a mortgage, but still need some cash, and you have only paid 70% of your debt. Is it possible to borrow a loan?
Yes! A home equity loan is the type of loan where the bank lends you the worth of your home, minus the debt owed. So, if you have settled 70% of your mortgage, you can borrow up to 70% of your home’s value.
The interest charged on home-equity loans are far cheaper than personal loans, and have a longer payment period, mostly with a fixed repayment.
4. Small Business Loans
If you are a small business owner, you can access borrowed cash through the small business administration (official website).
You can receive a loan after presenting a viable business plan to start or expand your current business.
The payment period ranges from five to 25 years.
Other types of loans include:
- Payday loans– these are short period, high-interest loans intended to sustain you until your payday
- Mortgage– these are loans taken to buy a home, offered by banks and building companies
- Car loans-these are loans taken to buy a car.