You’re Beginners Guide to Lending, Different Types of Loans, and What Type to Consider that Will Fit Your Needs
When you are thinking about applying for a first time loan, you will need a bit of information to help you decide what type of loan to apply for. There are different types of loans for different things. You might only need a home-loan for buying a home, or you may need financing to buy a new car.
Types of Loans to Consider:
- A Conventional Loan; will be a mortgage loan, which will be available from an institution that specializes in mortgage lending, that are not linked to a government, or you can also apply for a home loan from banking institutions. This is only for buying a house or apartment.
- Secured Loan: With this type of loan, you need to put up personal property as collateral to obtain the loan. The loan amount and interest rate can differ, depending on the value of the property that you put up for security. You can use a house, a vehicle or savings account as security. If you default on the repayment of your loan, the property goes to the lender.
- Unsecured Loans: This type of loan is not backed by collateral. The size of the loan and the interest rate will be determined by your income and credit history. This type of loan is also known as a signature or personal loan.
- Open-ended Loans: These are loans with a fixed credit limit, or line of credit. When paid of completely you can borrow again on the same line of credit.
- Close-ended loans: The main difference is that you cannot borrow from this type of loan again. This is mostly student loans, house mortgages and vehicle financing. Your loan decreases with each payment. If you need more credit, you need to apply again for a new loan.
There are also different types of institutions that lend out money, for instance, traditionally it will be a bank or lending institution, but you will also find other companies that do not work like the traditional loan providers. They help people without all the strict rules and regulations that go along with traditional institutions.