A Brief Guide To Different Types Of Loans
People decide to borrow money for a whole host of different reasons – from anything for setting a new business venture, through to purchasing something that is very expensive, such as an engagement ring or a new vehicle. However, because there are so many different types of loans out there to choose from, it can be difficult to know which is the best fit for your particular purpose of use.
To help clear this up, we have put together a list of the different types of loans that are out there and available for people looking to borrow money.
Home Equity Loans
For home owners who are in need of some extra money, they are able to use the equity that has been built up in it, for the purpose of getting a loan. With this type of loan though, you are only able to borrow as much as you actually own. Where a home is already completely paid off and owned outright, then you are able to borrow up to a maximum of 50 percent of the value of your property. The interest rates with these types of loans are much lower than the ones that you would get with any other type of loan. However, there is a trade off, as whilst low interest rates are good, the fact that your house is used as collateral and can be seized in the case of default is not good at all. There are no restrictions as to what this money can be used for.
Small Business Loans
Most banks / financial institutions out there offer small business loans and are applied for by those people who are wanting to set up their own business or for the purpose of expanding their current, well established business into a new premise, a new market etc. One of the requirements of applying for a small business loan is submitting a professional business plan. In the terms and conditions of a loan of this type will be a guarantee that in case of default, your personal assets can be seized and used as payment for any outstanding debt that there may be. Whilst the interest rates are usually something that you can negotiate, the repayment period is automatically set at anywhere between five and twenty five years.
There are many bricks and mortar and online banks / financial institutes out there, such as hikash, that offer borrowers personal loans. The funds received here can be used for anything that the lender wants, but typically includes things like large, one off purchases. However, because personal loans are not secured against any of your assets (in case of default), it means that the interest rates that you are subject to are much greater than is the case with other types of loans. The amount of money that people usually lend in the form of a personal loan varies depending on what their plans for the money is. The repayment period typically ranges from between 2 and 5 years.