It is quite true that one has to save a good amount of money for any unexpected financial crisis or emergency situation. However, this is not always that easy to pull off in today’s economy. Most of us are unable to save money for these situations; as a result, when we need it to deal with a difficult situation, we have to borrow. There is nothing wrong with taking out loans, but you must be aware of the different types available, their complexities, and their rules, in order to make an informed decision. You can use loans for several purposes like financing education, buying something that can be used productively, debt consolidation, general household plans, or dealing with an emergency crisis. In this article, we will discuss the six practical types of loans that you can take out to help you come out of a challenging financial position.
Personal Loans
Personal loans happen to be one of the broadest categories of loans; when it comes to repayment, the term duration is around 24 to 84 months. This makes them most feasible to apply for and manage. Although the category is labeled as “personal”, these can be used for any of your requirements. However, these loans do not cover illegal activities or education expenses. If you are thinking about applying for a personal loan, it can easily cover wedding expenses, a vacation, an emergency, a home makeover, relocation expenses, electronics, medical treatment, or debt consolidation. Usually, they are either secured (backed by some collateral) or unsecured (these do not require collateral and are only backed by the applicants’ signature). It is quite easy to apply for a personal loan; if your credit history is impeccable, it is quite possible that you can secure lower interest rates.
Title loans
Many people are not aware of this category of loans or mix it up with another. Title loans are another type of personal loan where you get a sum of money with lower interest rates, for a short period of time by pledging the title of your vehicle; your car, truck, or even RV. The best part of this loan is that it is quick, and you can get it without a hassle. People that specialize in title loans at Titlelo state that the fair market of your car is evaluated and, in some cases, and a 30-40 percent credit is usually awarded. It’s important to get professional advice on such loans because you need to understand the fine details. This is a useful loan that you can acquire to get quick cash.
Student Loans
These are specifically for paying through general college expenses, including accommodation, tuition, or other expenses at accredited institutes. While they are a great option for most students, you can use them to pay for an informal course or bootcamp. Students can avail private or federal loans according to their requirements and preferences.
Credit Builder Loans
These are short-term, small loans that are a nice option for building good credit. Usually, for many loan categories, good credit history is required, but since these are used specifically for improving credit, you do not need to have a credit history. They are an affordable and easy way to build credit.
Payday Loans
This loan is also known as a salary loan, and as the name suggests, it is a short-term loan that is credited to your account until your next salary comes in. The best thing about these loans is that they are not credit-based; you are not supposed to have a good credit history to avail of these. But, at the same time, there is a downside to these loans; their high-interest rates and finance charges. Finance fees can reach up to 400% APR, this is one of the main reasons why we see more defaults in this loan category compared to other types.
Credit Cards Are Also Loans
Credit cards are one of the best ways to save yourself in tough financial circumstances. However, it might be difficult to get a card if you are going through a tough time financially; for this, you need to arrange for a card beforehand. A credit card allows you a specific limit of credit every month, and once you pay your bill, your limit is renewed. The good news is that there is no interest charged unless you make a default. Credit cards are a user-friendly product, and many people rely on this plastic money to bring them out of financial challenges.
You must know and compare the different available loans out there before you pick one. It is also mandatory to prepare by setting a budget that will allow you to regularly pay your installments. It is not a great idea to take loans in order to repay previous loans. If you’ve fallen into such a loop, you should contact a credit counselor straight away and straighten things up with a professional approach.
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