Loans have been around for centuries. And although they’ve changed a lot throughout the years, one thing is certain – their purpose remains the same. In essence, a loan is an amount of borrowed money that’s intended for repayment within a given period of time. The intricacies of loans differ from type to type, so while some might be ideal for your situation, others might not be.
Learn more about the different types of loans and discover which ones you might benefit from with this short guide.
These are the most familiar to all borrowers, and are accessed through banks and some other financial institutions. Traditional loans can be unsecured like personal loans, or secured, like housing or auto loans. They can cover a large sum of money and are paid for over the course of several years. For the most part, these traditional loans have the biggest impact on your credit score.
As the name suggests, these loans are those that you receive in cash. The most common under this category are online loans, payday loans, and cash advances. It’s typically easier to get approved for a cash loan and they’re also much faster to process. The individuals who often opt for these types of loans are those with low credit scores, or those who need to get their hands on cash as soon as possible.
Small Business Loans
Specially developed for entrepreneurs and budding business owners, small business loans are granted strictly to those who wish to start or improve a venture. These are available through a range of lenders, and even the Canadian government offers them in the form of the Canadian Small Business Funding Program.
Debt Consolidation Loans
These loans are granted by specific financial entities aiming to help people manage their debt. The purpose of the debt consolidation loan is to pay off all of your existing debt to consolidate your payment into one monthly charge. The benefit is that you won’t have to juggle with different due dates that might be overwhelming and hard to keep up with. Plus, by consolidating your debt into a single loan, you also stand the chance to enjoy much lower interest rates.
A title loan is a loan that’s secured against a property or anything of value that you might own. Think of it as ‘pawning’, where you use your property to secure an amount – usually the appraised value of the collateral you’re putting on the line. Lots of different properties can be used for title loans like cars, houses, plots of land, and even certain types of equipment. Because these are secured loans, they’re also far easier to get approved for since your lender takes on much less risk.
While this might not be an all-inclusive list, it gives you an idea as to the diversity of loans available to the public. Of course, all of these loans can be smart and helpful choices to get out of a financial gap, but not all of them will be right for your situation. Exercise prudence when making your choice and make sure you plan ahead so you can enjoy your loan with confidence.