Consumers frequently wonder about common types of consumer loans, especially with the many different choices
available.
There are several types of loans that will fall into the same categories, along with
some common types that are only different in a couple of small ways.
Below, we will describe several
common types of consumer loans, including a few of the factors that could restrict who might be eligible for each
and how much interest you might have to pay.
Of course, we couldn't begin to
cover all of the types that may be available... only the types of loans that you will most likely to encounter.
Most, if not all common options available to you will fall into one of two categories... secured loans and unsecured.
Secured loans will require the use of some asset of comparable value to secure, which will serve as a repayment
guarantee and a means of offering you lower interest rates.
Unsecured loans, are just the opposite, require no collateral and will almost always require you to pay a
higher interest rate than secured loans.
Whether you are eligible for either of these may be affected by your credit history rating,
and secured loans may be influenced by the value and type of your collateral.
This is another of the common types of loans that offer the often needed money for an individual to further their education. They are most often backed by the government, allowing them to be unsecured. Because the loan is guaranteed they will usually offer favorable terms while maintaining low interest rates. Most student loans will have a deferred repayment option, allowing the student to repay over a period of time after they have finished their education.
One of the other most common types of loans is secured auto financing, which is a secured loan that an individual will use to pay for the purchase of an auto, truck, or other vehicle. The vehicle that is purchased will serve as the collateral, allowing for a person to purchase their new vehicle without the need to put up other collateral to secure the loan. Because most vehicles are high value items, auto loans are often available to consumers of different consumer credit ratings.
Mortgage loans are consumer loans that are used to purchase or refinance a home or other real estate, and
are another of the most common types. Just like auto financing, a mortgage requires
no other collateral to secure since the property purchased will serve as the collateral to guarantee
the loan.
Mortgage loans will tend to vary in repayment terms and interest rates, with the most common
repayment options many times lasting over a period of 30 years for larger mortgages. These loans may be received
from a variety of lenders, including finance companies, online mortgage lenders, and standard banks.
Much like other consumer loans, homeowner or home equity are loans that a consumer will take out using
collateral such as a house or other piece of real estate you already own.
The biggest difference between
home equity loans and mortgages is that home equity loans are taken out against property that the homeowner already
owns, and uses the equity (which is the value of the property thats already been repaid) as a determining factor in
terms and interest rates.
Most individuals who own their own home or real estate will qualify for a home
equity loan (provided that the consumer has sufficient equity in their home), without regard to their credit history
rating.
Very much like mortgages, home equity loans can be obtained easily by the consumer from finance
companies, traditional banks, online mortgage lending services, as well as other lenders... an increasing trend in more
recent years, however, is for home equity loans to be applied for and received through online mortgage services
because of the convenience and anonymity that consumers enjoy with online lenders.
