There are various types of loans which one can access and the type depends on the loan qualification, the borrower’s credit score, the amount and the need of the borrower among other factors. Every loan has its specific requirements and costs. Below are some of the types as well as considerations for each:
Personal loans are the most common type which many lending institutions offer and the loans can be used for any purpose. Most institutions will not require as much collateral for one to qualify but will require a proof that you earn income. The approval time for such loans ranges between few minutes to few days. For such loans, its highly recommended that one goes for smaller amounts to be paid within shorter periods.
Credit card loans
Although most people do not recognize it as so, when using a credit card that is a loan one is taking. Application of a credit card is done online and its approval takes minutes. For the credit amount to be extended, the creditworthiness of the applicant is considered and such is determined by their credit score. For credit card, you can use it almost everywhere but the biggest challenge with the card is that, once a payment is missed, the interest rate can be quite high. It can as well make you spend more than what you plan for.
Home equity loans
This is the type of loan that will allow one borrow against their home’s equity. Equity in this case refers to the difference of the home value and the owed amount. Majorly, the loan is used for improving the home. Interest rates for such loans are very low but with quite longer repayment periods. The interest attached to the loan is tax-deductible. However, the greatest drawback of the equity loans is that, once one defaults such a loan, you lose the home.
Before borrowing money, ensure to do homework on research, understand fully the agreement, get to know the repayment terms then settle for what serves you best.