When faced with a sudden financial crisis the first place we look up to are usually banks and financial institutions. The fastest and most reliable way to arrange for some cash and get out of a financial trouble is to get a loan from a bank. The objective of a loan isn’t only to overcome financial hardships but to help people realize their dreams and help them achieve financial freedom. Loans can be used to buy property, clear off existing debts or for investment purposes. Although loans provide the borrower with money there are different types of loans designed for different types of situations.
Before you approach a bank, lender or financial institution to apply for a loan it is important that know the different types and the eligibility criteria for each loan type. Some of the major types of loan include Personal Loan, Home Loan, Secured and Unsecured Business Loan.Personal Loans: Personal loan is taking credit form a bank or financial institution for personal use. Personal loans can be used for almost anything including going on a vacation, buy new equipments, renovating home or even for paying outstanding bills. The borrower after getting the loan starts repaying it with monthly payment along with interest. The interest charged on a personal loan can be either a fixed interest rate or a variable interest rate. Personal loans are best suited for financing short term expenses.
Home Loan: A home loan is a loan taken to buy a home or residence. At one point of time the above definition was apt for home loans but now it has expanded and is used to cover all types of residentially secured loans. Usually in home loans the home for which the loan is applied is kept as collateral with the lender and only upon complete repayment of the loan with interest the borrowers gets full ownership of the property. In case of home loans the repayment term is usually over 15 years to 20 years as the borrowed amount is big. Several factors affect the interest rate charged on home loans with down payment being a significant factor with the normal down payment being 20% of loan amount.
Secured and Unsecured Business Loan: Everyone requires loan and so do business houses. In secured business loan the borrowing business house uses a collateral to apply for the loan. The collateral adds security to the loan as in case of default the lender takes physical possession of the collateral and uses it to recover the loaned amount. As for the collateral, savings and investments can be used provided that its vale is equal to or greater than the payday loan today amount. Secured loans have the benefit of lower interest rates and easy loan terms. In unsecured loans the borrowing company doesn’t use any collateral and usually the interest charged is also higher than secured business loans.
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Three Major Types Of Loans