Three Common Loan Types You Should Know About!

You’ve heard of the term ‘loan’ before, and you know exactly what one is. But, did you know there are different types of loans? Here are three of the most common:

Short-Term Loans

This is a common loan type, particularly among younger people and students. This is because the aim of short-term loans is to provide you with quick cash. If you’re in desperate need of some money, a short-term loan is there to help you out. There’s a lot that’s written about short-term loans and not all of it is good. Many people condemn them because they seem to prey on the financially weak. Their target demographic are people that struggle with their monthly finances. People take out short-term loans, but can’t pay them back in time, so accumulate huge amounts of interests. Thus, the loan company makes a lot of money. Obviously, this is a very ethically questionable business plan! However, short-term loans are perfectly fine if you use them properly. Only get one if you know you’ll be able to pay it back on time. So long as you’re on time with your payments, you’ll have nothing to worry about.

Home Loans/Mortgages

Home loans are loans that you take out when you want to finance buying a home. Often you’ll see them referred to as mortgages. But, rest assured, they’re the same thing. Most people can’t afford to pay for their home outright, so they take out a loan to help them. These loans are extremely popular, but also extremely big. There’s a high chance you’ll spend the rest of your life paying back your home loan. There are also different types of home loans for different people. If you’re a military veteran, you’re entitled to VA home loans. Interestingly, for any Muslims, they must get a specific Islamic mortgage loan. This is because paying or receiving interest is forbidden in their religion. So, as you can see, there are different kinds of home loans but they all serve the same purpose!

Car Loans

As you can probably guess, these loans are designed for people trying to buy a car. Buying an automobile is a costly venture, the only thing that will cost more is your house. Bearing this in mind, it can be a struggle for people to finance the costs of buying a car. So, they opt for a car loan. The thing about car loans is that they’re tied into your vehicle. So, if you fail to repay the loan, then the loanee can take your car off you. Who is the loanee? Well, typically people will look at two places to get a car loan. They’ll either go to their bank or get one directly from a car dealer. Getting a car loan from your bank can take a while, which may inconvenience you. But, although getting one from a dealer is far easier, they charge higher interest rates. I’d recommend you get one from a bank but apply for it before you even start looking at cars. That way, when you find one you like, you don’t have to worry about waiting for a loan to be approved!

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