What are different types of loans?

What are different types of loans?

Any Types of Loans

Unsecured loans

Unsecured loans are more difficult to qualify for and have higher interest rates because an asset for collateral is not required. These are sometimes called personal loans.

Secured loans

Secured loans rely on an asset (such as a car, a home or a boat) that will be used as collateral for the loan.

Variable rate

Variable rate loans have an interest rate that changes based on market rates. Consumers payments will vary based on changing interest rates. They may end up paying more or less in interest based on the overall economic situation.

Fixed rate

Fixed rate loans have an interest rate that remains the same for the entire life of the loan. The payments for these will remain the same, regardless of whether the market interest rate goes up or down.

Home loans

Home loans, or mortgages, are available to help people finance their homes. Conventional mortgages usually require the borrower to have a down payment for 20 percent of the purchase price.

Car loans

Auto loans are available for both new and used cars, and consumers can obtain car loans from banks and credit unions as well as most auto dealers.

Business loans

Those wishing to open a business or expand their current business can take out loans to finance their ventures.

FHA loans

Many private lenders work with the Federal Housing Authority to offer FHA mortgages. These loans require a much smaller down payment than conventional loans.

Veterans Affairs loans

Armed service veterans, current service members and their spouses may qualify for a Veterans Affairs (VA) mortgage. These home loans have a very low down payment, and borrowers aren’t required to purchase mortgage insurance.

Who should take out a loan?

House hunters

Individuals who rent should consider taking out a loan to purchase their own home if they have a stable income. Mortgage payments are often lower than rent, and owning their property allows them to build equity.

Home owners

Homeowners who want to remodel or improve their house and those who want to lower their interest rate should consider refinancing their home.

Small business owners

Small business owners who want to expand their business should consider a small business loan.

Credit card holders

Anyone carrying an outstanding balance on a high interest credit card should consider whether they could save money on interest by taking out an unsecured personal loan.