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Loan contracts come in various forms and terms. It will actually range from a simple promissory note between friends and family members to more complex loans such as auto, payday, mortgage, and student loans. Regardless of its type, each loan will be governed by policies and guidelines to protect clients from unfavourable practices such as excessive interest rates. Moreover, loan length as well as default terms must be clearly detailed in order to avoid any confusion or perhaps possible legal action.
In case you are in need of money for a very important item or perhaps to help make your life more manageable, it is a must that you are familiar with all the kinds of loans that may be accessible to you along the different terms you can expect.
Different Loan Types
There are different types of loans which have a certain intended use. They can vary by length of time, by when payments are due, by how interest rates are calculated, and by a number of other factors.
Mortgages – These are distributed by banks in order to allow consumers to buy homes they cannot pay for upfront. This will be tied to your home. This further means that when you fail to pay it, your property will be foreclosed. As opposed to any other loan types, this has the lowest interest rate.
Student – These are offered to college students along with their families in order to help cover the cost of higher education. Generally, there are 2 main types of student loans – those funded by the government and those by private lenders. Experts say that the first option is better since it comes with much lower interest rates and better repayment terms.
Personal – These can be used for any personal expenses. This option does not have a specific purpose. It is for this reason that many are attracted to apply for such. Terms of this loan type will greatly depend on your credit history.
Small Business – This is often granted to entrepreneurs or to aspiring businessmen to help them set up or expand their ventures. Small business loan options will greatly depend on the needs of your enterprise.
Auto or Car – This is quite similar with mortgages since it is tied to your property. They will help you afford a certain car; however, you will risk losing the car when you miss payments. Auto or vehicle loans might be offered by a bank or by the car dealership directly. Though those offered through dealership are somewhat convenient, be aware that they usually cost more.