There are numerous different types of loans available on the market flexible enough to help you manage unexpected expenses. The only downside is the extent of information out there making things confusing when it comes to choosing the best kind of borrowing for the purpose you need it for. The most common place we think of when it comes to borrowing money is the bank or a credit union but there are also other ways to raise the funds to buy a car, pay off a student loan or to fund a home improvement project.
Here we take a look at all the different types of loans and personal finance so that you can see what each form of finance has to offer you.
Open-End & Closed-End Credit Options
These are the two basic levels of consumer credit you get with your credit card and means that you either get to stretch your balance out and pay it off piecemeal or you have to settle in full at the end of every month. Both have different APRs attached to them as naturally, the extended credit option offered by an open-end agreement is more expensive to finance than over a 30-day period. Closed-end credit cards are useful if you know that you only need the card for occasional purchases otherwise you can expect to get a shock at the end of the month.
Other examples of closed-end credit agreements include:
- Car finance
- Domestic appliance loans
- Payday loans
The most important thing to bear in mind with closed-end credit, particularly in the case of short term lending like payday loans, is that should you not pay the balance in full by the due date, the interest rate goes up significantly, making it easy to fall into debt very quickly.
A college education is a significant expense and for those with more than one child, the costs can keep mounting year-on-year. There are two types of student borrowing for you to explore: federal or private student loans. The federal option is generally more affordable and comes with a reduced interest rate and flexible repayment terms, whereas a private student loan is calculated to make the lender a profit.
Mortgages are long-term borrowing agreements that are secured by the value of the property it finances. Most people mistakenly say they are homeowners when they have a residual mortgage when in fact; they have a financial obligation – a liability if you will, rather than an asset. Naturally, there should be more equity in the property as the years of paying a mortgage off pass by but if you’re unable to make mortgage payments during that time; your home is at risk of foreclosure.
In a similar way to mortgages, auto loans are secured by the vehicle it finances and can help you afford to buy a better quality car than if you had to pay cash. This can save you money in the long run as a new car is more cost-efficient to run and there are different ways of financing your vehicle including straightforward car finance or by the increasingly popular route of leasing.
Whatever Kind of Borrowing you Require, it always pays to Shop Around!
Unless you’re looking for quick-fix financing such as a payday loan, it always makes sense to take a look at what options are available to you. By knowing the facts you can make a considered decision and prevent yourself from entering into a credit agreement that turns into a financial headache down the line. You can get easy access to car title loans online if you are looking for an alternative to payday loans for example, and use the value of your car as a way to secure some fast cash. Knowledge is power, especially in the finance world and so you should shop for your loans carefully.
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