Taking out a loan today is much easier than it was in the past. However, today there are way more types of loans that people are aware and most of them have different uses and different fine prints that people should be aware of before they take out a loan.
Additionally, before you take out a loan you must be aware of your credit score as you may not be eligible for a certain loan that you want, but you might get a different kind of loan made available to you. To know which loans are the best for your situation you must be informed about all the choices that the loan industry has and with us, you will know exactly what kinds of loans exist and which ones are the best for you. The main category of loans can be divided into two types of loans the secure loans and the unsecured loans.
As the name implies the secure loans are tied down to something secure that is either a rule or with materialistic value like a house or a car. The unsecured loans are the loans where you just take out a certain amount of money without any collateral or any specific rules, besides the one where you have to pay it back at a certain time. This can further be divided into two more types that are the open and close-ended loans, the fixed rate loans or the variable rate loans.
The open-ended loans
Are loans where you are approved a certain amount where the credit limit is your ceiling. For instance, this is the type of loan that works on your credit card. Here you spend money until you reach your limit and then once you pay it off you can again spend the amount that you have on the credit card.
The Closed-ended loans
Are loans that you take out once and have a fixed schedule to pay it back. Once the amount is paid back you are done with the loan and if you need more money again you have to go and apply for a new loan again. These loans can be loans for the mortgage, student loans, installment loans et. This type of loan is smart if you know exactly how much money you need and how much your monthly payments can be so you can pay it back without worry.
Are all loans that have a fixed amount of monthly payments that will stay the same no matter the length of the loan. So, if you take a loan with a fixed rate your monthly payment will be the same even if you take a loan for one year or for 5 years. The negative side of this loan is that you can’t take advantages of certain loans that have a lower rate for certain situations.
Are loans that can be taken out with a fixed rate for the first year but will after that fluctuate between a lower amount or a higher amount. The good sides are that you can end up paying a lower interest rate, but the bad side is that you can also end up paying more in some situations.