What Type of Loans Are There? Auto Home Debt Consolidation

As long as you have enough available credit and meet the lender’s required credit score, getting approval for a loan isn’t all that hard. There are many types of loans for all kinds of consumers. If you’re going to buy a house, there are home loans, if you’re in need of cash, there are personal loans, if you want to move your debt to escape high-interest rates, there are debt consolidation loans and so on.

We listed all of the loans that are available to average consumers. Find which type of loan is going to be the best for your expenses and needs. Upon determining the type of loan that suits you the best, you can use our calculator to find the likelihood of getting approval.

Common Loan Types

• Home Loans
• Car Loans
• Personal Loans
• Student Loans

Home Loans (Mortgages)

A typical home loan is going to have the lowest interest rate out of all loans. The payments are going to be very flexible and spread throughout the decades. In the end, each of your monthly payments is going to be less burden on your shoulders over time. This flexibility comes with the time span that you’re going to pay off your mortgage.

However, your mortgage is going to be tied to your home. So if you fall behind on payments, you might end up losing the home you’ve bought with the loan.

More Information About Home Loans

Auto Loans

Pretty much the same principals of a home loan apply to auto loans as well. Your auto loan is going to be tied to your car and if you fall behind on payments, once again, you may end up losing the car you bought.

The only difference is going to be the available loan amount and the length of the loan. Most auto loans are divided up to 72 payments. So the overall duration of a car loan is going to be much less than home loans.

Personal Loans

Without giving the purpose of your expenses, personal loans don’t have a designated purpose. You can spend your personal loan on anything that you want. The lender simply won’t even ask for it. Depending on your credit score, you can get up to $30,000 in personal loans but usually, the personal loans are limited to $10,000 or $15,000.

You can use personal loans as some sort of debt consolidation loan except without the limits. Personal loans can also be exceptionally advantageous if you want to reduce your credit card interest rates by transferring your current balance.

Student Loans

The most obvious type of loan that doesn’t need much introduction, student loans. So we’re going to cut it short.

Pretty much all college and university students can get student loans. Also, unlike most people think, families of students can also get student loans to help cover their kids’ cost of higher education.

Other Type of Loans

• Debt Consolidation Loans
• Payday Loans
• Cash Advances
• Small Business Loans

Debt Consolidation Loans

This type of loan is quite similar to how personal loans work but can only be spent towards covering up existing debt. You can get debt consolidation loans instead of personal loans if the available loan amount of personal loan isn’t simply enough for your debt.

The most common practice with consolidation loans is to transferring balances which ultimately cuts the interest. Therefore, you can save money by reducing the interest rates of your loan and credit cards.

Payday Loans

Payday loans have the shortest term loans that fill your financial needs from one paycheck to the next. If you’re basically living paycheck to paycheck and in need of assistance, the payday loans can provide relief.

Although it sounds good and all, there are many drawbacks to payday loans. Even the government advises Americans to not take payday loans because of absurdly high-interest rates.

Cash Advances

If you have enough limit on your credit card, you should simply forget about payday loans. Getting cash advances on your credit card is also considered a short-term loan by many lenders. The interest on the cash advances is going to be high but not as high as payday loans.

Don’t have a credit card or can’t get one? These might help:

More Information About Credit Cards for Bad Credit

More Information About Credit Cards for No Credit

Small Business Loans

Entrepreneurs who are starting their own business or need funding to expand their business can rely on small business loans. While you can get loans from private lenders, the best source of small business loans is the U.S. Small Business Administration. The administration offers a wide variety of loans that you can customize it according to your needs.

Since the loans are funded by the government, you are required to submit lots of documents as an entrepreneur. Also, you may wait for a longer period of time compared to other types of loans to get confirmation on approval.

Required Credit Score for Loans

Regardless of the type of loan you’re applying for, the credit score shown on your credit report is going to be very important for lenders. Most lenders use the FICO credit score to see how responsible you are with your payments and see all of your previously made payments. Since your payment history makes up more than one-third of your credit score, the lenders will put your recent payments into consideration.

In general, if your credit score is above 670, it is considered good and with a credit score like this, you can get pretty much any loan that you want. However, there must be enough room for the loan to get approval so check the available credit before making your application. The available limit and credit score can be seen in your credit report.

Want to learn more about how credit scores work and how it affects your finances? Read this article to get a full explanation and calculate your FICO credit score.