How will you decide what type of loan suits best to you?
When you start surfing at the market to wipe out the financial crisis from life, undoubtedly, you will find out several types of loans available in the market. Therefore, it becomes difficult for anyone to choose one among all. For this reason, one needs to know about them perfectly so that he can select only that type of loan which suits best to put out his financial crisis.
Besides, one should not forget to compare certain factors which differ from loan to loan. If you borrow a home loan, it can save you from paying the extra interest rate. Instead, if you take a personal loan to complete the house construction, the interest rate will be high and will not be increased the borrowing amount. For this reason, you need to know the purpose of a particular loan category and the comparative rate of interest. Let us see how many types of loans there are.
The concept of loan is divided into two major parts.
All types of loans come, either under this secured or unsecured category.
What is a secured loan?
By the term 'secured,' one can easily understand that money lent by the lender will be secured enough, and there is a minimal scope of loss. A secured loan is a type of loan which is taken by keeping a mortgage. A guarantor is needed for taking a secured loan. Moreover, a borrower needs to sign an agreement with the lender that if he cannot repay the loan amount, then the borrower's property will be taken over by the lender.
Therefore, a secured loan is a thing that provides enough assurance to the lender but, on the other hand, brings an extra burden on the borrower. If the borrower fails to repay, the lender can take hold of his property again and again. There are several types of secured loans. Such as:
LAS: The complete form of LAS is Loan Against Securities. Many people like to invest in shares and securities to get a good return in the future. Apart from getting a good return, those securities can help mitigate the need for money at once. By keeping those securities as a mortgage, the investor can get a loan.
LAP: Loan Against Property is a type of secured loan which can get instead of property. Almost everyone desires to build their own house because the property's value will increase day by day if appropriately maintained. One can also use this property as a medium of borrowing a loan.
By keeping a mortgage on one's house as a security, a person can become easily eligible for a loan. However, the amount of loan depends upon the condition of the house. To get a considerable amount of loan, the state of the house should be well. Remember, a well-decorated place always gets extra preference rather than a fragile old home.
Loan in terms of valuable jewelry: A type of secured loan is borrowing money instead of keeping valuable jewelry. Jewelry is of no use as it can't mitigate the need for cash in an emergency. However, you can easily borrow money by keeping them to a lender. It is a type of secured loan, so the lenders will happily provide you money, and with systematic repayment, you can easily take back the jewelry.
What is an unsecured loan?
By the term 'unsecured,' you can easily understand that it is a type of loan where the lender provides a loan without taking any security from the borrower, and for this reason, the chance of loss is higher for the lender. In an unsecured loan, there is no question of mortgage and guarantor. Therefore, this type of loan is a good choice for the borrower, but it brings extra headaches for the lender.
As a result, the interest rate becomes comparatively high, and borrowers are given a limited period to repay it. There are different types of loans under this head, such as personal loans, education loans, provident loans, house loans, and many more.
Personal loan: It is a type of loan that can mitigate the immediate need for cash. After applying for a personal loan, it can be sanctioned on the same day or within five working days. So personal loans are known as instant loans too. However, the chances of facing loss for the lender are high as nothing is kept aside as security.
A personal loan can put out different types of cash requirements like repaying credit card bills, repairing the house, medical emergencies, or carrying out the expenses for celebrating a marriage ceremony.
Education Loan: It is also a type of personal loan, which the students especially borrow. Often students fail to get admission at overseas universities or become orphans. They became unable to carry on their higher studies of the shortage of money.
For them, the educational loan is just perfect. To avail of this loan, the lender will not judge the capability in different parameters. Moreover, only a few formalities are to be completed to get the loan, and the rate of interest will be comparatively low for the borrower who is a student.
Provident loans: This is a type of loan where a small amount of money is lent and should be collected the repayment on a particular day of every week. Provident loans in Ireland are prevalent. Because of its easy repayment structure.
Undoubtedly, repaying a small amount is more accessible than repaying a considerable amount. In our daily life, it is widespread when you feel the necessity of a small amount. With this type of loan, a borrower can easily borrow from €500-€10000.
House loan: To build the dream home, if you feel that you need money, then a house loan is just perfect for you. A house loan can wipe out the hindrance between you and your dream home.
Besides, this type of loan is an unsecured loan, and the interest rate is comparatively low. One can repay the whole amount in the long term.