It is common for people to take on loan to finance their needs such as for purchasing home, financing education, or any general living expenses. There are many types of loans to choose based on individual needs. With that, there are various options available to choose.
The loan market provide various type of loans so borrowers can choose the right one. It is important to do your own homework before applying for any type of loan. You need to know what type of debt obligation that fits for you. Every little factor can affect your finance so being thorough on your research is absolutely necessary.
Breaking down each type of loan
Installment loans are the most common loans preferred by consumers. The lenders give some amounts of money and the borrowers pay it back over time in monthly payment. Example products are student loans, mortgage, personal loan, auto loan, etc. so here are differences of each type of loan:
Student loan tends to be varied for private loans so you will need to dig and compare further. The maximum amount is up to $12,500 annually for undergrad loan. The term length is also varied.
It depends on borrower’s debt and post-grad income. Student loan is categorized into unsecured loan because it doesn’t require collateral. However, the interest rate of student loan is relatively lower than other unsecured loans.
Mortgage loan is considered a big deal because it usually involves big amount of money. It is up to $424,100 for conforming loan. For jumbo loans, it can be over $424,100.
You can consider the term length of mortgage as good or bad because it takes 15 to 30 years. This is categorized into secured loan because your purchase property, house, etc) is the collateral.
Personal loan can be both secured and unsecured loan and it involves no collateral. The term lengths of repayment is varied. It can take up to 10 years. The maximum amount of money is different between secured and unsecured loan so you need further research between financial institutions.
Auto loan has maximum amount of money up to $100,000. The term length around 2 to 10 years. Most auto loan is typically secured. Thus, the lenders will take the vehicle that the borrowers purchased if the borrowers are in default.
Auto loan is very common. People apply for auto loan so that they can purchase vehicle they want for personal or business purpose.