6 Types of Loan Options You Can Consider

Whether it’s to finance your monthly expenses or a home improvement project, purchase a brand new car, or start a business, there’s always a way to complement your income and secure some much-needed cash. In fact, the modern market abounds with borrowing options that are guaranteed to fit your needs, and not necessarily through a traditional bank.

Despite the variety, remember that all loans weren’t created equal! In that spirit, the following guide should help you get a better understanding of the 6 different types you may want to consider the next time you apply for a loan.

1.Personal Loans

A personal loan is one of the easiest ways to borrow money. They’re offered by virtually every bank and financial establishment nationwide. The typical amount ranges anywhere from $100 to a few thousand dollars. It’s quite a costly option, though, seeing as this type of loan is unsecured, meaning it isn’t put up against collateral like a traditional mortgage or auto loan. Nevertheless, you’ll still be expected to prove that your income and the value of your assets will indeed allow you to repay the loan. The application process is quite short, and you can expect a verdict within just a few days.

2.Payday Loans

As the name suggests, these are short-term loans that are due to your next payday. It’s a convenient alternative to personal loans if you don’t have savings put aside and need to pay some overdue bills. A payday loan usually amounts from $500 to $1000 and comes with high interests. There are always safe options by PaydaySeek to be explored whenever you’re caught in a pinch and don’t have access to cheaper credit options. A payday lender will typically ask for authorization to withdraw from your account on the due date or to sign a post-dated check.

3.Secured Loans

Here, the bank or establishment will require that you put up collateral in order to back up the loan. This could be a personal asset such as a property, a car, or a certificate of deposit. Since the loan is secured, you are less risky as a borrower, which entails lower interests and fees on the amount you’ll be borrowing (up to tens of thousands of dollars). The only drawback is that you run the risk of losing your asset in case of default on debt. As such, it’s advised that you only take out a secured loan only if you’re confident in your capacity to repay it.

4.Credit Cards

Depending on your credit score and level of income, you may qualify for a credit card from your bank. The concept works similarly to a personal loan, with the exception that the credit card is revolving debt; you may borrow the same amount over as long as you’re able to repay it. Failing to do so will result in additional monthly interests and overdraft fees until the borrowed sum is paid back off. All in all, credit cards are greatly convenient but require a good deal of financial self-discipline to avoid overspending.

5.Home Equity Loans

This type of loan enables homeowners who are repaying their mortgage to borrow the amount of equity they’ve built up so far. In other words, they can borrow the equivalent of how much they actually own the home. 

For instance, if you bought your house for $1,500,000 and have managed to settle half of the mortgage, you’ll be allowed to take out a loan of up to $750,000. These proceeds are usually destined towards home expansion or improvement, and home equity loans have low-interest rates compared to other options.

6.Small Business Loans

Lastly, self-starting entrepreneurs looking to kick off or expand their operations will most likely need to apply for a small business loan. The requirements for this include submitting a business plan to be reviewed by the bank and the Small Business Administration (SBA), along with some form of collateral to secure the loan. In general, these loans have negotiable interest rates and can be repaid over a period of 5 to 25 years, depending on contract terms.

Nowadays, most of us rely on credit in order to support our life projects. Regardless of your current resources, assets, or borrower profile, you’re bound to find a loan option that will allow you to make your projects a reality. At the end of the day, remember to research and compare lending institutions thoroughly before taking out any loan, and to exercise the utmost caution; falling down the spiral of over-indebtedness is sadly all too common.