Types of Loans
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Types of Loans

Created by
@MotivatedMalachite

Questions and Answers

Match the following types of loans with their key characteristics:

Personal loans = Unsecured with higher interest rates for small amounts Cash advances = Easy to get with extremely high interest rates Mortgage loans = Secured by purchased property with tax-deductible, low interest rates Small business loans = Available from local banks, require business plan and collateral

Match the following types of loans with their primary purpose:

Personal loans = Easier to obtain for small amounts with average credit history Student loans = Common with reasonable interest rates but can lead to substantial debt Home-equity loans = Allow borrowing against house equity for additions or debt consolidation Cash advances = Considered only when no alternative ways to get money exist

Match the following types of loans with their potential use cases:

Student loans = For recent graduates facing substantial debt Mortgage loans = Enables individuals to buy homes with structured terms and low interest rates Home-equity loans = For home additions, improvements, or debt consolidation Small business loans = Available from local banks, often requiring a business plan and collateral

Study Notes

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.

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