Do you know what types of personal loans exist? …
When we need money to finance a project and look for bad credit loans we find that there is a great variety of offers.
In addition to that, we can see that there are different types of loans that we can request.
Each of the different loans is designed for a specific purpose and profile.
If we want to know how to properly choose the credit we need, we must know the details and the peculiarities of each one.
Types of personal loans and their characteristics
Applying for a personal loan can be a difficult process, especially when you do not know what type of loan you should apply for.
There are many different types of personal loans to meet different demands and financial situations.
If you need a personal loan but you are not sure which one is right for you, these are some of the basic concepts you need to know.
First, you must know that there are secured and unsecured loans. Let’s see in more detail what they are:
Loans with guarantee
They are those loans that require you to leave an asset as collateral.
That is to say, as a guarantee that the lender will be able to recover the money that he has lent to you in some way in case you can not pay it.
Therefore, if you hire one of these loans and you stop paying it, the lender will proceed to keep the asset that you have left as collateral.
Mortgages are loans distributed by banks and private lenders to allow consumers to buy homes that they can not afford in advance.
A mortgage is linked to your home, which means that you run the risk of a foreclosure if you fall behind in payments.
Mortgages have one of the lowest interest rates of all loans.
Like mortgages, car loans are linked to your property.
They can help you pay for a vehicle, but you run the risk of losing the car if you do not make the payments.
This type of loan can be distributed by a bank, a private lender or by the car dealer directly.
But you must understand that while dealer loans may be more convenient, they often have higher interest rates and, ultimately, cost more in general.
A line of credit is a type of loan, but it is different from basic loans such as a mortgage or car loan.
If you are familiar with credit cards, you will understand the basic characteristics of most lines of credit.
These loans have a maximum limit, and borrowers have the option to borrow any amount up to that limit.
Some of these lines of credit require that you leave an asset as a guarantee of payment as a property.
Or you may even be able to use cash as collateral instead of committing your physical assets like a house or your car.
For example, you can use the money you have in savings accounts or certificate of deposits.
Remember, if you do not make the payments, the lender will keep your assets.
Loans for company
Business loans are given to entrepreneurs and aspiring entrepreneurs to help them start or expand a business.
These loans offer a variety of options according to the needs of each business.
A loan for a guaranteed company is backed by an asset (property, machinery or a vehicle, for example), which means that the lender can claim ownership of the asset if the loan is not repaid.
What is a bank guarantee?
In the case of a guarantee, the bank grants the receiver of the guarantee the promise to pay compensation to the extent of the amount of the guarantee if the receiver of the guarantee requires it from the bank.
The purpose of a guarantee is to offer the security of the recipient and a quick monetary compensation if the other party of the contract does not fulfill its obligations.
These are the benefits of a bank guarantee for a recipient:
- Helps to reduce the risks derived from contracts
- Allows the recipient to receive monetary compensation quickly and easily
- Help avoid the risks associated with advance payments
In other words, if your bank serves as an endorsement, he agrees to make your payments in case you can not make them.
For the bank to issue this guarantee, you must first accept to give you credit before issuing the guarantee.
On the contrary of secured loans, they do not need an asset to be able to grant you credit.
But these usually have the highest interest rates, due to the risk of default that the lenders submit to.
This loan is given to people who can prove their economic solvency, so it will depend on the credit score and their good credit history.
In addition to their debt/income ratio, these are also known as online loans on the spot and are a great opportunity for users who need money quickly.
Let’s see some unsecured loans:
Personal loans can be used for any personal expenses and have no designated purpose.
This makes them an attractive option for people with outstanding debts, such as credit card debts, who want to reduce their interest rates by transferring balances.
Like other loans, the terms of the personal loan depending on your credit history.
And your financial solvency …
Credit cards are used for many things: they can be used to make purchases when you do not have the cash and pay them later, to leave them as collateral when you go to a hotel and to earn rewards and rewards when making purchases.
Basically, they are a type of loan, which instead of getting cash in your balance.
You will get credit from a lender, such as a bank or credit union, that you can spend with a card.
Then, banks add interest to the amount you have spent, unless you cancel your balance each month.
The issuer of the card will study your profile, your financial solvency, your credit history and if you have low credit score you may be denied credit.
Or that the interest rate is higher.
These credits are granted in just a few minutes and with them, users can get up to € 800 instantly.
They are usually used to resolve specific liquidity shortages, such as when unforeseen events arise (fines, overdrafts, breakdowns, higher than normal bills …).
These credits are contracted through the Internet by filling out a web form and without needing just paperwork.
Depending on the profile of the user will have different offers, such as mini-credits that admit people registered in files of defaulters as the ASNEF or people who do not have payroll.
One of the most attractive offers at the moment is the Vivus mini-loan, which offers up to € 300 free on the first loan.
This means that the user will not have to pay interest or commissions for their first loan: they will only have to pay back the money that has been lent to them.
A student loan is a loan granted by a credit institution or public sector organization that is usually long-term.
This type of loan is designed to help students pay for higher education.
The interest rate is usually relatively low and there is no early repayment rate.
Loans between people (P2P) involves borrowing money without having to go through a traditional lender, such as a bank.
It can be used by people or companies that need a personal or commercial loan.
The money comes from investors who can be people or companies.
People who invest in this type of loan are buying a financial product, usually a managed investment product.
While the borrowers are taking out a loan that is repaid over time, with interest.
To summarize what types of personal loans exist
Consumers commonly take out loans to finance home purchases, education, debt consolidation, and general living expenses.
For the small growing business, loans are available for working capital, equipment, real estate, expansion, and inventory.
In summary, there is a wide variety of options available in the loan market.
So it is important to investigate what type of debt obligation will work for you most financially.
So you can find the best product according to your economic needs …