What are 5 common types of loans?

A loan is a sum of money that is expected to be paid back over a period of time with interest or a monetary value on top of the initial price borrowed. Below are 5 common examples of loans available to consumers.

Secured Loan

Secured loans are a form of lending that an asset is used as collateral should any default be made on the payments. Traditionally secured loans are lower than the unsecured loan alternative. In most cases, the asset in question must be pre-approved to proceed with the personal loan application. Examples of assets can range from a car, to appliances within the home or even in extreme circumstances property.

Unsecured Loan

This form of lending doesn’t have a pre-determined asset for collateral. In most cases these types of personal loans are quite popular amongst regular consumers, which does come with some strings attached. Applicants are assessed solely on their credit history and income to qualify for the loan. If in any chance you do default on the loan, lenders are able to use debt collectors and lawsuits to recall the loan.

Open Ended Loan

This is a form of lending that can be regenerated at any given time without having to submit an application form. A typical example of an open ended loan is a credit card. But be aware this isn’t an open ended bottom less pit of money, you have a set limit of which you can spend which is called a Credit Limit

Car Loan

There are many forms of car loans. There are loans where you apply to purchase a car which in this case is your security. The other is a logbook loan where you are borrowing a pre-agreed amount for something else and your car will be the asset seized should you not make repayments.

PayDay Loan

Since the Global Financial Crisis, this form of lending has been seen as quite popular to those really desperate within society. In other words people who have repeatedly been refused lending from other financial means. PayDay Loans are in some cases the last resort for lending. More often than not PayDay lenders will charge a significant interest rate well exceeding the amount initially borrowed.

With any form of lending do make sure that you can afford to pay back anything lent on time!