Types of Loans

Types of Loans and Key Considerations

• Personal loans are often unsecured and easier to obtain with an average credit history, typically for small amounts not exceeding $5,000, but with higher interest rates than secured loans.
• Cash advances are easy to get but come with extremely high interest rates, usually for small amounts, and should only be considered when no alternative ways to get money exist.
• Student loans, such as Stafford and Perkins loans, are common and offer reasonable interest rates, but can lead to substantial debt for recent graduates.
• Mortgage loans are typically the biggest loans, secured by the purchased property, and enable individuals to buy homes with structured terms and tax-deductible, fairly low interest rates.
• Home-equity loans and lines of credit allow homeowners to borrow against their house equity for home additions, improvements, or debt consolidation, with tax-deductible, fairly low interest rates.
• Small business loans are available from local banks and require more work, often needing a business plan and personal assets as collateral in case the business fails.

Learn about the various types of loans available, including car loans, student loans, and home mortgages. Understand the concept of borrowing money from a bank or financial institution and the responsibility of repaying the principal amount along with interest.