Applying for a loan can be a daunting task for first-time borrowers, especially if you have no idea what to apply for. Be it for an emergency or your dream car or starting a business, loans are there to assist you. After all, loans should be able to cater to your needs.
So what do you need? Knowing where you will use the money is important to lenders. No matter how simple or complex the loan you’re planning to apply for, it has its conditions.
Each loan is unique as each one addresses different aspects of your needs. You should be able to understand the details and intricacies of your loans to find one that suits you the most.
If you’re nervous about approaching a lender personally, don’t worry. Some first-timers do feel that. The good thing is, because of technology, online lending had been thriving ever since. Lenders like CreditNinja offers loans that you can access online.
What are loans?
Loans are both great and risky. When applying for one, you’re signing yourself up for a debt, which you need to pay off consistently. Too much, however, can cause you different troubles with lenders and probably even the government itself.
A loan is money borrowed from either a friend, a bank or a financial institution. This comes with an exchange, and paying for it in the future may add up an interest. You have to pay for the amount of the money you borrowed plus the additional interest added as a charge for accepting the loan.
This is to ensure that lenders would still receive payment despite the risk of applicants running away and not paying their debt.
There are two categories of loans: secured and unsecured. Secured loans meant that there’s collateral needed to be signed off so lenders can take your possessions if you’ve failed to pay the money. Unsecured loans, on the other hand, don’t need collateral. Lenders won’t be able to take your possessions forcefully. However, chances of lawsuits are still available options for them, so be careful.
1. Personal Loans
A personal loan is probably the most convenient loan to apply for. It can be used for just about anything – paying for outstanding debts, or fixing that leaking pipe, or any reasonable expenses. It usually doesn’t need collateral, so honesty is a crucial factor whenever someone applies for this loan. That’s why lenders would check your credit records thoroughly and perform a background check when you apply for one.
It is easier to claim money faster whenever applying for this loan, and it has a fixed rate interest. It can be paid in a fixed and determined length of time with a fixed monthly payment. It has lower interest rates than credit cards, so some people opt to apply for this loan rather than credit cards.
2. Student Loans
Are you a high school student hoping to obtain higher education? Then a student loan is for you. A student loan is offered to hopeful college students or their families. It is paid after you graduate and get yourself a job.
The only drawback is that this is a very costly loan, and is a problem throughout the US. But because since many students wanted to obtain a degree, they still take risks and apply for student loans. According to economists, there is a probability that by 2021, the total accumulated student loan debt might reach $2 trillion.
3. Mortgage Loans
Mortgage loans are probably the biggest loans that you could ever get in your life. This loan revolves on buying a new home, or anything that is a form of real estate. If you’re planning to buy a house, then this loan would likely fit you.
However, on-time payment is essential as mortgages are considered secured loans. The houses you purchase immediately turn as collateral. If you failed to pay the mortgages, the bank or the lenders could take away your home. Paying off a mortgage can take years to pay off.
4. Auto Loans
As the name suggests, auto loans are loans for purchasing a vehicle. Just like mortgage loans, cars are collaterals for missing a payment. This loan can be taken from either the bank or a car dealership, although their interest rates might differ significantly.
Before applying, check your credit score and reports first. Look for any doubtful accounts or outdated records you have, and find a way to disprove them. A better credit report can quickly improve your credit score. With these, you can find a better interest for a car loan.
5. Bad Credit Loans
Bad credit loans are something you probably wouldn’t want to have. This loan has a wide range of subtypes and is aimed at people with bad credit scores, questionable credit history, or having trouble applying for loans at big banks. These have a higher interest rate and sometimes require you for collateral against the loan.
The examples given above are just some of the many types of loans available in the market right now. The loans you plan to take should align with your needs. Remember also that good credit scores and reports are essential when applying for loans. Though there’s a loan available to those with neither.