There are many types of loans available and it is often difficult to know which loan method is best for you and your circumstances. This article will help you identify each loan type and the basics of each package.
Secured loans offer a higher rate of lending as they are secured by an item of value. The item that the loans are usually secured by is the home of the borrower. This means that if the repayments are not met, the borrower could lose their home. There are advantages to this loan. As the lender has security from the home which has been signed against the loan, the interest charges and loan repayment can be lowered. This provides a convenient method of repayment to the borrower.
Unsecured loans are generally offered in lesser amounts to a secured loan and do not have as long a repayment scheme. The borrower does not have to sign anything against the loan so they will lose less if they cannot meet the repayments. The lender has more to lose in this situation and may be more reluctant to give out a loan.
Home loans are loans offered to help borrowers purchase a house. The other, more common name for a home loan is a mortgage. In this situation the money is not given to the borrower, it is transferred directly to the person that is selling the house. A deposit is generally required for this type of loan. The deposit is usually around 10% however more is often required during the difficult financial times. If you do not meet the repayments you may lose your home as it will be repossessed.
Debt consolidation loans are used to help customers minimize their debts into one lump amount. Many people have a number or credit cards and other debts. A debt consolidation loan will pay off all of your debts, leaving you with only 1 company to pay back, which is your loan company. A repayment plan will then be set up so that your debt can be paid off.
Now that you are aware of the basic loan types and how they work, you should be able to make a decision more easily about the type of loan you want to take out.