Different Types of Loans
If you’re looking to borrow money, you have some options! There are many different types of loans—each with their own use case, pros, and cons. Before you borrow money it’s best to understand the type of loan agreement you’ll be entering. In this article, we’ll be covering some of the most common types of loan agreements available.
Before you accept a loan, consider why you need the money and be sure to select the best type of loan for your situation. Always carefully check the terms and conditions of the financial arrangement. And make sure that the long term effects of the loan align with your existing income and obligations.
Common Types of Loans:
- Home Equity Loans
- Unsecured Personal Loans
- Secured Personal Loans
- Student Loans
- Small Business Loans
- Credit Card Loans
- Auto Loans
- Short Term Loans
1. Home Equity Loans
A home equity loan is a secured loan. With this kind of loan, you’ll use your house as collateral to borrow additional funds. Lenders base the amount of this kind of loan on the equity that you currently have available in your home. It will be the difference between what your home’s market value is and the amount that you owe for your home. In most cases, lenders will limit the loan to no more than 85% of your available equity.
Borrowers usually take out an equity loan to pay for home improvement expenses or high medical bills. Before going with this type of loan, make sure that you can afford the payment. If you were to default on a home equity loan payment, you could lose your home. The average fixed rate for a 15-year loan is around 5.8%.
2. Unsecured Personal Loans
Consider applying for an unsecured loan if you have good credit. This type of loan does not require collateral, and often has few restrictions on use. If you are in credit card debt and paying high interest rates, this kind loan is often used as debt consolidation to save money on interest.
When you take out an unsecured loan with a lower interest rate, you’ll be able to pay off your debt more quickly. If you need to finance a large purchase, such as a home renovation or a medical expense, then an unsecured loan may be the best option. The average rate for this type of loan ranges from 5% to 36% depending on your credit report.
Consumers with a high credit score will receive the lowest interest rates. If your credit is on the low side, then you may still qualify for a personal loan, but you will probably pay a higher rate. Be sure to shop around for the best rate if this is the case.
3. Secured Personal Loans
Secured personal loans are usually an option for borrowers who have no or poor credit. They are often a great way to establish or rebuild your credit history. A secured loan is one that requires collateral like the deed to a car or an upfront deposit. The lender will use the collateral to secure your loan.
A secured personal loan may feature a lower rate than unsecured loan options. This is because the collateral decreases the lender’s risk of lending money. If you have collateral and know that you’ll be able to repay the secured loan in full and on time, then a secured loan may be an affordable way to borrow money.
Keep in mind that when you put up collateral for a loan, you are at risk of the lender taking possession of it. For instance, if something unexpected happens that causes you to be unable to repay the loan, the lender could take your vehicle or the deposit. The average interest rates for personal loans range from 10% to 28% based on your credit rating.
4. Student Loans
Loans for students are available for those who need financial assistance to attend a college or university. You can take one student loans through the U.S. Department of Education. Private financial institutions, such as banks and credit unions, also offer them.
Federal student aid is available in different forms. For instance, you can apply for a direct subsidized loan or a direct unsubsidized loan. You may qualify for a subsidized loan if you have a financial need and require help to cover the cost of college. Unsubsidized loans are available to those who do not have a financial need for additional help. The average interest rate for a student loan is around 5.5%.
5. Small Business Loans
Most banks offer small business loans. This type of loan is usually requested by someone who is just starting a business or expanding their current one. This kind of loan generally requires you to provide a formal business plan for the lender to analyze and grant approval.
Often, the lender of small business loans needs the owner to give them a personal guarantee as well as a business plan. This means that you may need to put up a personal item as collateral to protect the lender against default. Business loans usually include payoff terms that range from five to 25 years. According to statistics, the average small business loan amount in 2018 was around $660,000.
6. Credit Card Loans
Most credit cards have a cash advance feature that lets the card member withdraw cash as a short-term loan. While this is a convenient way to get your hands on a little extra cash, it’s not usually the most affordable option. Credit companies frequently charge a fee for the convenience. These companies may also charge higher interest rates on cash advance withdrawals. The average interest rate for this kind of loan is around 25%.
7. Auto Loans
Auto loans are a type of secured installment loan designed to help you pay for a vehicle. When you take out an auto loan, the financial institution will generally deliver the funds to you in a lump sum. You’ll pay for the car using the loan, and then, you’ll make payments to the auto loan lender. This type of loan will include interest. The average rate for a 60-month auto loan is around 5.25%.
8. Short Term Loans
Short term loans typically used to supplement income in-between pay periods. These loans can often have an APR between 400% and 600%. The loans are typically tied to a bank account with the payment automatically drawn on each due date. These loans are similar to unsecured personal loans, but are typically held for short periods of time.
At Nice Guys Loans our fees are often less than half of typical short term loan providers. Our loans are unsecured and can be set in installments matching pay days—either weekly, bi-weekly or monthly up to 7 months
Even with bad credit, or no credit, Nice Guys Loans will work with you. Our rates are considerably lower than many payday loans and short term lenders. If you’re interested in working with us, you can apply online here.
At Nice Guys Loans, we offer some of the best short term loans with rates that are considerably lower than other lenders offering similar financial products. At Nice Guys Loans, we provide a fast and affordable way for consumers to borrow money.