6 Types of Loan You Need to Understand

There are certain types of loans that everyone should know something about. Here are six that you definitely need to understand.

  1. Small Business Loan

For anyone who wants money in order to start a business, they will need a small business loan. It’s very difficult to get a business off the ground if you don’t have the cash to make it happen. So, you need to make sure that you explore this option if you’re looking to start a business. Getting into debt straight away might not seem like a great idea, but the terms of small business loans tend to be favorable.

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  1. Guarantor Loan

Guarantor loans have grown a lot in recent times. They are perfect for people who have very poor credit ratings but still need to get their hands on some money. They work by allowing the borrower to choose a guarantor, who obviously has to agree as well. That person will then be held responsible for paying back the money if the original lender can’t manage to do so in the future. They take a risk in doing this, but it can be good for everyone.

  1. Peer to Peer Loan

Peer to peer lending is another relatively new phenomenon. It allows people to borrow money from people who are not conventional forms of credit. It works by allowing anyone to lend money to anyone who is looking to borrow. There are many sites that connect people who want to borrow to people who want to lend. The person who lends the money aims to make a profit after the money is paid back with interest.

  1. Mortgage

Mortgages are the most common form of loan for people who want to buy a house. Most of us can’t afford to stump up the cash to buy a home outright, so having the option to take out a large loan is ideal. The repayment term is very long, and it will take most people decades to pay off their mortgage. Visit a site like moneysupermarket.com if you want to lean more about mortgage repayments.

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  1. Payday Loans

Payday loans have got a bad reputation in recent times. But they still offer people a great way to get their hands on money at short notice. Of course, the money has to be paid back relatively quickly, and the interest rates can be higher. But no other form of loan will give you access to money so quickly and so easily. You can go to a website like PersonalMoneyStore.com if you want to find out more.

  1. Secured Loans

Secured loans are one of the most dangerous and risky types of loan out there. The fact that they are secured means that the lender will get your home or car as collateral if you fail to pay it back. That means that you could effectively be made homeless if you don’t meet the repayment deadlines. But it does also mean that your credit score is less important than it might otherwise be.