4 Different Types of Loans and Choosing One That's Right for You

Are you trying to figure out the different types of loans you have available to you? Read this article to learn more about the different loan types.

4 Different Types of Loan and Choosing One That's Right for You from North Carolina Lifestyle Blogger Adventures of Frugal Mom

According to a recent study, 59% of Americans live paycheck-to-paycheck. This means at some point in your life, you will probably need to apply for one of the various kinds of loans.

Borrowing money from a bank or other lender can be an overwhelming process. There are so many different types of loans that choosing the best for your situation and needs can be a confusing task.

If you are thinking of applying for a loan and are not sure which one is the best fit, this short and simple guide about Top Online Loans is for you.

1. Personal Loan

One of the most popular types of loans is a personal loan.

When you are approved for a personal loan, you receive a lump-sum payment, which is paid back in pre-determined installments over a specified time. Once you pay off the loan, the account is closed, and you would need to reapply to receive a new loan.

A personal loan can be used for anything, including making a major purchase, consolidating debt, or paying an unexpected expense. They can be secured with collateral or unsecured, and approval is typically based on your credit score and history.

2. Business Loan

Another popular loan type is a business loan.

You can use a business loan for any type of business funding. For example, a bridge loan is a short-term loan you can use while securing more permanent financing (if you need this type of financing, go here to learn about bridge loans), while an equipment loan is funding specifically to help your business purchase essential equipment. You might also want to look into working with a reputable bridging finance broker to obtain all the finances for your business needs.

Typically, your business would need to be a minimum of 6 months old and earn at least $50K in annual revenue to get a business loan. However, your personal credit history can be used for approval.

3. Auto Loan

Of the many different kinds of loans, an auto loan is the one you are probably the most familiar with. A car or truck is a significant purchase and usually requires financing from your bank or the financing company that works with the car dealership.

Car or Truck Loans are long-term installment loans. You purchase the car and agree to pay a set amount each month for a specific number of years. Your credit score and history determine the interest and amount of your payments.

If the payments are not made, the car is repossessed, but you still may be responsible for part, if not all, of the original loan.

To avoid it being repossessed, you can look into refinancing. Auto refinance is the process of refinancing an existing auto loan under different terms in order to gain access to lower interest rates or better repayment options. By doing so, borrowers like those who auto refinance with Space Coast Credit Union can save hundreds or even thousands over the life of their loan by reducing monthly payments and overall expenses associated with financing their vehicle purchase. Additionally, it can be easier to manage debt when payments are reduced over a longer period of time.

4. Student Loan

Student loans are designed to help students pay all the fees associated with school, including:

Tuition
Housing
Books
School supplies
Misc. fees

Student loans can be government-funded or privately funded. Either way, the interest rates are generally low, the approval process is easier than other loan types, and the borrower is given a grace period to pay, usually, 6 months after the student has graduated.