What are the main types of loans?

Loans are good financial resources to help you overcome some difficult moments in life, especially in cases of problems and needs.

This is because there are several situations where bills are tight, and seeking financial services can make a difference.

To help you get to know a little more about the various types of loans available on the market, check it out!

Secured Personal Loan

Personal loans are versatile and can be used for different purposes, such as consolidating debts and making purchases.

The secured format requires the inclusion of some property or car as collateral, as the name suggests.

Typically, it offers loans with lower rates, as the financial institution has the asset as collateral in case of non-payment. In terms of amounts, it varies widely, reaching thousands of dollars, usually with payments between 1 and 10 years, in addition to fixed interest rates.

Unsecured Personal Loan

Unsecured personal loans, as the name also suggests, do not require any collateral. Typically, this type of financial resource is based on two factors: credit history and monthly income. Since there is no collateral, interest rates tend to be higher, in addition to requiring a perfect credit score.

Payday Loans

A payday loan is a type of very quick personal loan, with companies promising a very fast credit check.

This type of loan allows you to repay the loan on your next payday or government social benefit date.

Thus, it works as a kind of salary advance, useful when you need money quickly to pay something right away. Generally, the maximum amounts are lower, usually in the range of $15,000.

Mortgage Loans

Mortgage loans are intended for the purchase of real estate, with higher amounts mainly to cover part or all of the property acquired. In addition to new properties, mortgages can also be used for renovations or restructuring. Currently, there are a good variety of mortgage formats

The amounts are determined based on a careful credit analysis of the borrower, with repayment terms that can go up to around 20 or 30 years.

They can have fixed interest rates, which remain the same throughout the loan term, or adjustable rates, which can change periodically.

Bridge Loans

This type of loan is useful when you have sold a particular asset, such as a property, and are waiting to receive the money.

The loan works to advance all or part of these amounts, with interest applied, of course, like any other type of loan listed here.

Debt Consolidation

In general, personal loans themselves can be used for this purpose, but there are also specific options for them. In this sense, you take out a single loan to pay off your debts, consolidating different obligations into one.

This is a good way to reduce interest rates, such as those from credit cards, for example, with a new renegotiation to make things easier.

Other Loans for Specific Purchases

A type of loan like a personal loan does not have a defined purpose since you can use the money to buy whatever you want. On the other hand, the U.S. market also offers loans for specific purposes; here are the main ones:

Auto loans

These are specifically designed for the purchase of vehicles, whether new or used.

The vehicle itself serves as collateral, meaning if you don’t pay, you lose the asset. In most cases, these loans have fixed interest rates and repayment terms that vary from 3 to 7 years.

Studant loans

These are intended to cover higher education costs, including tuition, fees, books, and living expenses. They can be obtained from the federal government or private lenders. There are even government programs to facilitate repayment, with good grace periods.

Business loans

These are financings to start, expand, or maintain a business.

They can be used for various purposes, such as purchasing equipment, inventory, real estate, and covering operating expenses. There are options with or without collateral, with lines of credit that vary widely.

Taking out a loan can be a strategic decision that provides significant benefits, from dealing with financial emergencies to investing in education or business.

However, it is essential to carefully consider your repayment capacity, interest rates, loan terms, and the impact on your credit.

Mortgage Loans

This is a very specific type for buying new and used properties; learn more about it.

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