A Brief Look At Various Types of Loans Available
A Brief Look At Loans
"Innovative financial packaging" is how it is sometime known. Essentially
what this means is that financial institutions look for more and more ways to
lend to their customers - after all, charging interest on a debt is the main way
that they make their money. But, with more and more loans now available, it can
sometimes be difficult to know exactly which loan to apply for. The following
explanations try to clear this issue up a little for you:
Personal Loan
Probably the mainstay of financial institutions is the personal loan. As the name
suggests, personal loans are money borrowed from a financial institution for personal
use. In nearly all cases, a personal loan is going to be unsecured, which means
you'll likely be paying a premium on interest. Once the personal loan is given,
you repay it by making monthly repayments to the lender. In effect, this is the
multi-purpose loan.
Auto Loans
Auto loans are where you borrow money from a financial institution in order to
buy a car or vehicle. In most cases auto loans are done by the car dealer, but
there is no reason why you cannot make arrangements with your bank before buying
the car to borrow the money from them. As with a personal loan, most auto loans
need to be repaid by monthly installments. Sometimes, although not always, the
financial institution will secure your loan with the vehicle, which means if you
cannot repay the loan they'll repossess your car. One additional expense with
an auto loan is that most lenders insist that you take out fully comprehensive
insurance during the period that the auto loan is outstanding.
Home Improvement Loans
As the name suggests, home improvement loans are where you ask a lender to lend
you money so you can improve your home. In most cases a home improvement loan
is granted on the condition that you give the lender a second rank mortgage on
your home. As such, the loan amount can rarely exceed the valuation price of your
home - including the increased value after the improvements have been made. Again,
home improvement loans usually need to be paid by monthly installments; however,
balloon (or bullet as they're also know), one-off, payments are also sometimes
accepted.
Education Loans
Education loans are where you borrow money to further your studies. One big difference
between an education loan and any other type of loan is that most education loans,
although given by a financial institution, are underwritten by the government.
Consequently, the interest rate on education loans (also known as "student
loans") is usually very low.
Holiday Loans
These days it is even possible to go to your bank and ask them to borrow money
so that you can go away on holiday! As you'll be using the money to go on holiday,
this type of loan is unsecured. Consequently, interest rates are high. Not really
a recommended way of paying for your holiday, but nice to know it's out there
if you need it!
Debt Consolidation Loans
Unfortunately debt consolidation loans are becoming more and more popular these
days. A debt consolidation loan is where you have too much debt on store cards
and credit cards and you need to borrow money to pay these all off and consolidate
them into one big debt. The advantages of doing this are two-fold: (i) hopefully
you'll lower the borrowing interest rate; and (ii) you only have to deal with
one creditor.
Having decided upon the type of loan you want, all you need to do now is to ask
your financial institution to approve the loan - Good Luck!
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Sara Dowling is the owner of Be-Healthy.net and Hosting-Spot.com
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