Loans can be one of the most beneficial financial tools out there, but it’s important to know the different types of loans available and which loan is right for you before jumping into anything that seems good on the surface but could end up ruining your finances in the long run. With so many loan options out there, it’s hard to know what’s available, what works best in which situations, and how to avoid scams that could leave you in an even worse financial situation than when you started. Here are some of the top 10 different types of loans available in the USA today.
1) Personal Loans
Personal loans are a type of loan that you get from a bank or financial institution. These loans are designed for an individual and they can be used to cover a variety of expenses. The minimum amount required to take out these loans is often lower than other forms of financing, but personal loans do have higher interest rates and fees associated with them.
2) Home Equity Loan
If you own a home and want to borrow against it, a home equity loan is a great option. A home equity loan is typically used for debt consolidation and other short-term expenses, although it can also be used to purchase property (with approval from your lender). Home equity loans usually carry lower interest rates than other types of loans, making them less expensive. However, they’re secured by your home and have higher rates if you miss payments.
3) Credit Card Consolidation Loan
Credit card consolidation loans are very convenient and helpful to people who are trying to repay their debt. These types of loans allow you to consolidate multiple credit cards into one single loan with a much lower interest rate than your original credit cards had. If you need help paying off all your credit cards, then a credit card consolidation loan is a good way to go.
4) Education Loan
The best type of loan is one that allows you to pay it back relatively easily with a small monthly payment. This is where education loans are concerned, such as Stafford and Perkins loans, both offered by government entities for students. These have fairly low interest rates and a manageable payment schedule, but you’ll have to get a high-paying job to pay them off quickly.
5) Auto Loan
An auto loan is a type of financing that allows you to pay for your car over time. These loans typically have low interest rates and are great for purchasing a new or used vehicle. Most people get an auto loan to purchase a car but it can also be used to refinance your current auto loan, repair your vehicle, or make improvements. You can use an auto loan calculator online to get an estimate of what you might pay based on different factors such as credit history, current status, and value.
6) Medical Loan
If you’re not feeling well, but can’t afford to go to a doctor or dentist, here is a way to get yourself some medical attention. If you need some extra cash for any sort of medical procedure, then it is best that you avail a medical loan. These loans are designed to help people who don’t have enough money to cover their costs related to surgeries and other healthcare services.
7) Merchant Cash Advance
Like a credit card cash advance, merchant cash advances are short-term loans used to help businesses make it through their most difficult times. Instead of swiping your plastic, though, you’re using your daily credit and debit card sales as collateral. As long as your business stays afloat and pays off its balance by a certain date (usually one month after borrowing), it doesn’t have to pay back any interest.
8) Business Loans
If you want to start your own business, a business loan can help you get started by providing seed money or funds for expansion. It’s critical to understand that a business loan is not free money. Depending on your personal credit and financial situation, it might not be easy to obtain one from a bank or other lending institution. Regardless, it never hurts to apply; if accepted, a business loan can help you secure financing for office space and supplies.
9) Working Capital Loan
A working capital loan is a short-term loan that covers expenses and loans needed for business operations. You’ll usually pay a higher interest rate with a working capital loan than you would with other loans, which can leave you paying more over time. It’s typically easier to get approved for a small business working capital loan than for other types of small business loans. The larger your business, the more difficult it will be to get approved.
Everyone can find a loan to suit their specific needs. Depending on your goals, you might need some type of financing that has not been mentioned here. If you can’t find what you’re looking for locally, check out online loans. You have hundreds of lenders at your fingertips!