We all want to save up money for our retirement or make a big purchase, but this does not usually happen. Because in reality, you cannot always save up on significant expenses like college education, buying a house, a car, or for unexpected emergencies like medical bills.
But you can always take a loan if you cannot save up money and need instant cash. But before taking one, you will need to know more about the different types of loans available so that you can get one based on your needs and requirements.
If you are looking for quick loans, you should go for a personal loan. It is the most commonly sought after loan as it is the broadest loan category. The repayment term for this loan is between 24 to 84 months. One can use this loan for just about anything except college education or illegal activities. People commonly use personal loans for home renovations, weddings, vacations, emergencies, medical treatment, etc.
Personal loans come in two forms. They can either be secured or unsecured. Secured loans are backed by collateral. This collateral can either be a savings account or a vehicle that a lender could take back if your total loan amount is not repaid.
On the other hand, unsecured loans do not require collateral and are backed by your signature alone. Hence they are also known as signature loans. Moreover, unsecured loans tend to be more expensive and require better credit as the lender takes more risk.
It is easy to apply for personal loans, and one can easily do it online through a bank, credit union, or online lender. Borrowers with excellent credit can qualify for better personal loans with low-interest rates and a range of repayment options.n
An Auto loan is one type of secured loan that you could use to buy a vehicle with 3 to 7 years repayment terms. The collateral for the loan here is the vehicle itself. So if you cannot pay back the loan, the lender will repossess the vehicle.
Typically, auto loans are obtained from credit unions, banks, online lenders, or car dealerships. Some car dealerships have a financing department to help customers find the best loan from partner lenders. Others operate as buy here pay here lenders. Here the dealership itself gives you the loan, which tends to be more expensive. However, some car dealerships offer a zero interest loan facilitated through third-party lenders and not by the stores.
An advance Salary Loan is a temporary loan offered to salaried professionals in India. Unlike personal loans, some lenders calculate the interest rate for these loans monthly or even daily. Therefore, the interest rate and other loan terms will likely vary from lender to lender. However, one notable advantage of these loans is that they are available even to individuals with an average credit score. Moreover, many lenders disburse advance salary loans within hours, if not minutes. Due to this fast processing time and high-risk nature, these loans have a significantly high annual percentage rate. But these loans could help an individual during a dire situation. Therefore, it is advisable to opt for these loans only during emergencies when no other options are available.