If you need cash but don’t know anything about loans, look no further.
A loan is a financial tool for anyone that’s looking to get something they can’t currently afford. They allow people to borrow money and repay the lender over a mutually agreed period between the two parties.
What confuses people about borrowing is the fact that there are countless different types of loans. This can cause people to get a loan they don’t need or stay away from borrowing. However, understanding what some of the most popular loans are will help you if you’re interested in getting one.
Read on to learn about the most common types of loans to help you decide which one is best for your situation.
Personal Loans
Personal loans are some of the most common types of loans because they’re available at most banks and credit institutions. These loans can be acquired by anyone providing that they have a good credit score
What makes a personal loan a great option for many people is the fact that they can be used for anything. It doesn’t matter if you need the loan for your business or personal use, you can borrow several thousand dollars.
While a personal loan can benefit most people, the downside to them is that they’re unsecured. An unsecured loan is one that doesn’t provide the lender with collateral, meaning you could face hefty interest rates.
Payday Loans
Payday loans are similar to personal loans in that they’re accessible and can be used for anything. The difference between a payday loan and a personal loan is that payday loans have shorter repayment periods and higher interest rates.
They’re nicknamed “payday loans” because lenders expect you to quickly repay them, usually within 2-4 weeks. This loan type is designed for anyone that’s strapped for cash and needs some as soon as possible.
When you apply for a payday loan, you can expect to walk away with cash within the same day. Payday loans don’t offer as much as most types of unsecured loans, but they’re an effective means of borrowing money.
Mortgages and Car Loans
Mortgages and car loans are some of the most popular loan types because most people in Canada get them. Unlike personal and payday loans, mortgages and car loans are secured. Secured loans provide the lender with collateral, in this case being a house or a vehicle.
When you take out a mortgage, the lender will sell your home to make their money back should you decide to neglect payments. The same goes for car loans that people get from places like dealerships.
These loans are so common that people typically don’t put much consideration into them before applying for one. While a mortgage or car loan allows you to buy an expensive piece of property or vehicle, you need to think about if you can afford it.
Student Loans
Just like a mortgage or car loan, student loans are designed to be used for a specific purpose, which is an education in this case. Student loans are much different than other loans because they often come from the government.
The government offers two types of student loans: subsidized and unsubsidized. Subsidized loans are based on a student’s financial need and don’t accrue interest while they’re in school. Unsubsidized loans can be applied for by a student, independent of their financial need, and they’ll accrue interest during school.
For anyone looking to apply for a student loan from the government, you’ll need to fill out the FAFSA. This is an application that asks you about your family’s financial status to determine whether or not you’re eligible and for how much.
While getting a student loan from the government is common, some people choose to go to private lenders. Private lenders will almost always strictly offer unsubsidized loans, and unlike the government loans, they’ll have high interest rates.
Line of Credit
Many people are also familiar with lines of credit as they commonly use credit cards. A line of credit is a loan type that revolves around constantly borrowing money. However, this type of loan doesn’t need to be applied for numerous times.
If you were to apply for several personal loans, your credit score could take a hit and the process could delay a long time. A line of credit allows you to keep borrowing from one source providing that you continue to make payments.
When you get a credit card, you’ll be given a line of credit, which is what your spending limit is. For example, if your line of credit is $3k, you can’t spend more than $3k. After you’ve spent the entire $3k, you’ll need to pay it before borrowing again.
Most credit cards are set up to allow borrowers to continue making purchases if they’re making payments. So you wouldn’t need to pay off the entire $3k before borrowing. Instead, you could pay off $500 and borrow $500 again.
Which of the Different Types of Loans Are Right for You?
There are many different types of loans relating to a variety of things. Some loans will help people with businesses whereas others are to be used for educational purposes. No matter what situation you’re in, there’s a loan that could help you.
It’s up to you to determine which one is right for you. If you’re someone that needs to get cash quickly, you could go for a payday loan. If you want to fund a project, a personal loan may be your best bet.
Contact us today if you’d like to learn more about our loan services. We’ll be happy to answer any questions you may have about Captain Cash!
