Types of Loans Available In The Market

Considering comfortable living at the first place, loans have become quite important. They have made our lives easy and secure. Right from our student life till retirement, loans provide us with many benefits. Whether, you are planning to go abroad for studies, purchase an apartment, or a car, loans help you everywhere. Also, there are different types of loans available in the market. So, you can go for the one you need.  In case you don’t have much idea about the different types of loans, going through can be a great help. Read on!

Open ended loans

These are one of the frequently used loans. This is because you can opt for them as many as times. Lines of credit (LOC) and credit cards are two of the most common in this respect. When you take these loans, you are provided with a credit limit against which, you make all your purchases. Every time you buy something using credit cards or LOC, the credit balances decrease. Once, you repay the amount you spent, your credit balance increases, accordingly. However, repaying on time saves you from the possible consequences of not doing the same.

Close ended loans

Unlike, the previous form of loans, these variant once repaid cannot be taken again. Auto, mortgage and student loans fall under this category. For this credit, the repayment amount comprises the interest and fee agreed when signing the agreement. One of the best advantages of this type of loan is it allows the borrower get the chance to get a good credit score, provided the repayment is done as per the date specified in the credit agreement. Efficient financial management can help you a great deal in such cases.

Secured and Unsecured loans

A secured loan is that type of financial help that relies on an asset as security deposit (collateral). For example, you applied for a secured loan against your home. In this case, your home is the collateral.  In case, you are unable to repay on time, the money lender has got all the rights to take the possession of your home. The interest rate of a secured installment loan is low. Mortgage, auto loan, recreational vehicle loan are some of its examples. On the contrary, an unsecured loan is free from collateral. The interest rate of this loan is high in comparison to the secured ones. Inability to repay it may lead to lawsuits.

Other types of loan

Conventional loan is another term for this loan is mortgage loan. This category of loan is not approved by government organizations. It is true that loans have improved the quality of our lives. However, a payday loan when not handled properly can take your peace away. This is because of its notorious nature.  Not only for its high APR (annual percentage rates), but disastrous consequences on inability to repay on time makes it the last choice for every loan seeker. So, before going for it, do look for other alternatives available to you. However, in spite of knowing the risks related if you want to take a payday loan, make sure to be on time in terms of repayment.

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