5 Different Types of Loans and Why They Are Important
There are many different situations in life that may require a loan, and the process of securing one can feel overwhelming without proper education. Thankfully, there are many resources available that can help you understand the positive and negative aspects of different types of loans. This form of financing is very beneficial; it helps individuals partake in business endeavors that require capital and aids people that are struggling through tough financial periods. In this article, we will share five different types of loans and why they are important.
1. Bad Credit Loans
Years ago, it was nearly impossible for individuals to secure loans with poor credit. Unfortunately, there are many people that are in this predicament and need a cash loan to pay their mortgage and bills while they are waiting for their next paycheck. Bad credit loans are small amounts of money that are granted to individuals without a credit check. This type of financing is sometimes cosigned, and other times, it is unsecured. This type of debt will often equate to a few hundred dollars up to a few thousand dollars.
2. Debt Consolidation
Debt consolidation is the process of combining many monthly payments into a single monthly payment. When you consolidate your debt, you are often able to secure lower interest rates and late fees. There are many companies that will purchase all of your debt and then consolidate your payments so that you only have one payment to keep track of.
3. Student Loans
Student loans are a very common type of debt held by many individuals across the globe. This funding is granted to students in order for them to complete their college education. This money often covers the cost of tuition, rent, books, and other living expenses. Since this is federal funding, there are set interest rates for the entire term of the loan. The goal is that students will have the ability to pay down their debt after they begin their careers.
4. Business Loans
Business loans are often granted to new companies or struggling businesses. At the launch of a business, a great deal of capital is needed to get it off the ground, and in most cases, these resources are secured from private investors. However, if a company faces turmoil or is expanding its product lines, it can secure financing to help overcome challenges or embark on new opportunities. This financing can often equate to millions of dollars.
5. Personal Line of Credit
Credit cards are another type of financing that many people do not view as a loan. In reality, credit companies are granting you a certain amount of money to be utilized. Since credit cards can have high-interest rates if they are not paid on time, it is important that timely payments are completed each month.
Summary
Loans are an important part of our economy. On an individual level, this type of personal credit and financing can help individuals overcome difficult seasons in their lives. Professionally, outside funding can help businesses grow and expand in exponential ways. It is important to handle lent money with care so that you do not undergo extreme interest rates or issues with a debt collector.
This article has been published in accordance with Socialnomics’ disclosure policy.
