Contrary to popular belief, not all debts are bad. A lot of people, in fact, use debts as capital to fund another type of venture that can potentially give them more earnings. If you are thinking of taking advantage of this opportunity, you might want to consider applying for loans. However, you need to go through the available options to choose which loan would best suit you. Here are the different kinds of loans you can choose from:
1. Payday Loan – A payday loan is for a person that is experiencing financial crunches but not necessarily financial difficulties. You can simply ask for a small amount, then you can pay it off when your next paycheck comes in. If you failed to pay it on time, you have the option to roll it over the next pay day. However, additional fees will accumulate. This is most common for people who went over their budgets or are in need of an emergency financial source immediately.
2. Secured Loan – Secured loans are also known as loans with collateral. The financial institution will request for any of your properties to serve as collateral, which will stand as assurance for them that you will be able to pay the amount you borrowed. The institution that lent you money will end up foreclosing or repossessing said property, if you failed to pay the amount within the agreed timeframe.
3. Unsecured Loan – These are simply loans that do not require any of your assets as collateral. These are usually known as personal loans which an individual acquires for emergency purposes. To grant the loan, the lenders refer to a person’s income, credit history, and his/her word to settle the debt as set in the agreement. Due to high risks on the part of the lender, however, most unsecured loans tend to have higher interest rates and penalties. This type of loan is perfect for you if you only have short-term loan plans.
4. Open-ended Loan – This type of loan is usually provided by banks. This is also known as a revolving loan, because once you pay off the amount that you borrowed, you can request for another loan. This is where an institution will provide you a spending limit that you need to pay off on a certain date. One common example of an open-ended loan is a credit card.
5. Close-ended Loan – Unlike open-ended loans, close-ended loans will not allow you to have an extension of your loan for the same account, even if you were able to pay off the amount that you borrowed. Keep in mind that the longer you pay for the amount, the interest rate will most probably rise. Some examples of such loans are mortgages, auto loans, and student loans.
As with any type of financial activity, you need to mull it over before applying for a loan. Once you’ve decided, choose the type of loan that would fit your need, and make sure you pay them on time to avoid any inconvenience in the future.
About the Author: Thirdy Rosales is doing marketing consultation for Debtconsolidation.com.au. This financial institution provides assistance to some personal monetary issues such as dealing with bad credit loans, providing debt consolidation loans and handling bankruptcy issues. You can follow him on Twitter @Tweetendshout.