In one survey, nearly 50% of respondents stated that they would not have the money to cover a $400 emergency.
When you don’t have the money to cover an expense, you have the option of selling something you own or taking out a loan. If you’re seeking the latter, then you need to know the different types of loans available to you.
Loans range from personal loans to title loans and even credit card cash advances. The first step to getting one of these loans is knowing what they are and how they work.
Keep reading for the answer to “what are the types of loans out there?”
1. Personal Loans
The majority of lending institutions offer personal loans. These types of loans range from a few hundred to a few thousand dollars and they can be used to pay for almost anything.
Personal loans are either unsecured or secured. A secured personal loan requires some type of collateral in case you default on the loan. An unsecured loan doesn’t require any collateral.
2. Payday Loans
Payday loans are short-term loans acquired from a payday lending institution. They’re based on your personal paycheque.
With a payday loan, you write a personal check for the amount you want to borrow, and the amount includes finance charges. In return for that check, you receive cash immediately. If you need cash quickly, then what you need is a payday loan.
The amount you receive, the fees you pay, and the amount of time you have to repay your payday loan all vary depending on what state you live in.
3. Title Loans
People who own a car have the option of taking out a loan based on their car title. These range in their value but they all require that your car be used as collateral for the loan.
Typically, you’ll have 15 to 30 days to repay a title loan. If you don’t make the payment on time, you risk your car being repossessed.
4. Home Equity Loans
People who own a home have the option of obtaining loans based on their home equity. These are secured loans that use your home equity as collateral for a sum of money. That sum is based on the difference between the value of your home and the amount you owe to the bank.
Many people use this type of loan to pay for home improvements. However, they can be used for a range of different reasons.
5. Credit Cards
Did you know that using your credit card is considered a type of loan? Every time you pay with your credit card, you’re receiving a type of personal loan.
The same can be said for credit card cash advances. These are short-term cash loans from the bank.
Although credit cards are a convenient way to get a loan, they can be expensive because of the interest charged.
More Articles Like “What Are the Types of Loans”
The first question you need to answer when seeking to borrow money is: what are the types of loans? There are personal loans, title loans, home equity loans, and more. Now that you understand what they are and how they work, you can start figuring out which is right for you.And for more personal finance articles like this one, check out our lifestyle blog regularly.