There will be several points in your life when you’ll want to take out a loan to cover expenses that you can’t afford out of pocket. The type of loan that you apply for will depend on your financial status and your needs.
Find out about some different loans that you might consider.
Auto Loan
Are you hoping to buy a car in the future? It’s not likely that you can afford to buy the entire vehicle at once. You will likely have to sign up for an auto loan. An auto loan will help you pay down the cost of the vehicle, along with interest. Typically, auto loans will last for 72 months (approximately 6 years).
Follow CryptoMode on Twitter, Youtube and TikTok for news updates! An auto loan is considered a secured loan. Secured loans have collateral to incentivize proper repayment. Collateral is a valuable asset — in the case of an auto loan, that asset is the car that’s being purchased. If the borrower defaults on this type of loan, the car could get repossessed.
Asset seizure is not a risk that comes with unsecured loans. Learn more about the differences between secured vs unsecured before you go loan shopping. The differences are very important.
Mortgage Loan
Planning on jumping into the housing market for the first time? Then, you will have to take out a mortgage loan. A mortgage loan will help you pay down the steep cost of your house (along with interest). The average term for this loan is 30 years. So, it will take quite a while to complete the payments and consider yourself mortgage-free.
Certain factors will impact your mortgage loan terms, like the size of your down payment. With a smaller down payment, you are more likely to take on higher interest rates. You will also have to sign up for private mortgage insurance. Private mortgage insurance is a safety net for the lender (not the borrower) in case the borrower goes into default.
Home Equity Loan
A home equity loan is only available to homeowners. It’s a type of secured loan that allows homeowners to borrow against the equity that they’ve built in their homes. Home equity is the difference between the current value of a borrower’s house and their remaining mortgage. It’s sometimes called a “second mortgage.”
With home equity, you can also apply for a home equity line of credit (HELOC). This would be a form of revolving credit that you could use and reuse. Your home equity loan is a closed-end credit account.
Student Loan
College tuition can be incredibly expensive. So, you may need to apply for a student loan in order to handle the tuition fees, among other education-related expenses. You won’t be alone in this. According to the Washington Post, 1 in 5 Americans hold student loans.
You can apply for federal student loans, which are funded through the government. Federal student loans tend to have lower interest rates and longer grace periods than private student loans.
To see if you’re eligible for federal student loans, you should fill out a FAFSA form every year. It will let you know what federal student loans you qualify for. FAFSA will also inform you of the grants and scholarships you qualify for, which you will not have to repay.
Pawn Shop Loan
A pawn shop loan is a small loan completed through a pawn shop. In this arrangement, the borrower will pledge a valuable item (for example, a piece of jewelry) as collateral. If the borrower does not complete their loan repayments on time, the shop will take ownership of the pledged item. They may decide to sell it in order to recoup the losses from the unpaid loan.
People tend to turn to pawn shop loans when they’re dealing with small emergencies, and they are short on cash. When you are dealing with a small emergency, you can turn to other borrowing solutions like personal online loans or credit cards for help. At the very least, you don’t have to worry about losing a precious valuable when you’re struggling with repayments.
These are just some of the loans that you should know about! One day, you might find yourself applying for one of them.
None of the information on this website is investment or financial advice. CryptoMode is not responsible for any financial losses sustained by acting on information provided on this website.
