When it comes to borrowing money, it can be a bit of a minefield. With so much financial jargon, business chat, and a huge number of acronyms, you would be forgiven for not having a clue if you are making the right decision or even choosing the right type of loan for you in the first place.
With this in mind, this article will help you determine the difference between loans and help you work out which might be the best option for you!
Home and Mortgage Loan
For those who are looking to take the next big step and buy the house of their dreams, or the one closest to that which they can afford, a home and mortgage loan is the most popular choice.
The amount of money you are allowed to borrow is based on both the property value and the amount of money you are able to use as a down payment on the house.
When you are approved for this type of loan, the property is then put up for collateral while you make monthly mortgage payments to pay off the loan for the house. These payments usually span 15 to 30 years – so it is not a decision to be taken lightly!
Business Loans
If you are looking to set up a new business, this might just be the loan for you. There is usually an agreement where the borrower is asked to offer up an asset of value for collateral, usually related to the business such as equipment or inventory in return for either a one-time loan or a line of credit, depending on the business’s needs. Business loans are also available for those who already have an established business they would like to grow, so this is a great option when businesses need expanding due to successes.
For those who might not have a business approved plan and have just started something in their kitchen which has taken off by surprise, there are equally useful loans that will take a personal belonging such as a car for collateral, in order to give you a short term loan. Read this comprehensive post by the car title loans Egypt Lake Leto experts at Fast Money Car Title Loans for more information.
Payday Loans
Payday loans are short-term loans that are due the moment you receive your next pay check. These should really be reserved for emergencies as they are notorious for high fees and extortionate rates of interest, which can further cripple families who are on a low income. It is always best to consider if you have any alternatives before you go down this route and if you do have to go down this route, make sure to get financial advice.
Student Loans
For those who are looking at taking up further education, student loans are specifically designed to help kick start your journey. This loan would be used to cover tuition fees, accommodation, textbooks, and other related educational materials. However, it is worth noting that this type of loan does not require collateral upfront!