Taking out a loan for a variety of financial requirements without knowing about the various types can lead to difficulties. A few things you should know before applying for a loan.
So, there are multiple types of loans for different requirements. Before taking out a loan, you should determine which type of loan is most suitable for your financial demands. In this blog, will see different types of loans and What to consider with different types of loans.
Different Types of loans:
| Loan type | Purpose | Loan length | Credit check | Collateral required |
| Personal loan | A wide range of personal expenses, from home improvement to vacations | 12 to 84 months (about 7 years) | Yes | Sometimes |
| Debt consolidation loan | Combining debts from various sources into one loan | 12 to 84 months (about 7 years) | Yes | No |
| Home loan | To buy new property and home construction | Five to 30 years | Yes | Yes |
| Student loan | To pay for a post-secondary education | five to 15 years | Yes | No |
| Auto loan | To finance a vehicle | 12 to 84 months (about 7 years) | Yes | Yes |
| Medical Loan | To fund your Medical Emergency | Up to 300 months (about 25 years) | Yes | Yes |
Personal Loan:
Personal loans are unsecured loans. It allows you to borrow money from a bank or lender, which you can then use for a variety of objectives like organizing a trip, doing business, or planning your dream wedding.
However, the borrowed funds must be repaid with additional interest charged by the lender. Because it is an unsecured loan, the lender will not take away your things if you fail to make your loan payments, but it may have a bad impact on your credit score.
Debt consolidation loan:
If an individual has multiple debts and wants to pay them off faster, a debt consolidation loan is a preferable option. It allows borrowers to pay off their debts faster and makes monthly payments easier.
Since it, unsecure debt consolidation loans come with high interest rates. It can be useful to pay your credit card bills medical emergencies, and others.
Home Loan:
A home loan is also referred to as a mortgage loan. It is a type of secured loan that allows individuals to finance the purchase of a property, where the property being purchased serves as collateral.
Since it is a secured loan, you can typically borrow a loan-to-value ratio of up to 85%, which means you can take up to 85 % of the home’s value. However, the percentage can vary between lenders or any financial institution.
Student loan:
Student loans are a type of financial aid that helps individuals finance their educational expenses, such as tuition, fees, room and board, and other related costs. These loans are designed to make higher education more accessible and affordable for students and their families.
Types of Student Loans:
| Criteria | Education Loan | Student Credit Card | Smart Education Loan |
| Loan/Credit Type | Term Loan | Revolving Credit | Term Loan |
| Interest Rate | Fixed or Floating | Revolving Credit Interest Rate | Fixed |
| Loan Amount | Up to the full cost of education | Typically lower limits | Up to the full cost of education |
| Repayment Period | Starts after course completion or 6-12 month grace period | Pay minimum amount due monthly | Starts after course completion or 6-12 month grace period |
| Security/Collateral | Typically requires collateral or co-applicant | No collateral required | No collateral required |
| Eligibility | Students, job seekers, employed | Students | Students |
| Tax Benefits | Interest paid is tax-deductible | No tax benefits | Interest paid is tax-deductible |
Auto loan:
An auto loan is a type of loan offered to buy a new or used vehicle like a car, bike, or truck. Usually auto loans come with fixed-rate repayment and loan tenure ranging from 12 to 84 months (about 7 years).
Usually, auto loans are secured by the vehicle you are purchasing, which acts as your collateral. Banks and other financial institutions offer unsecured car loans for people with excellent credit scores.
Medical loans:
Medical funds are unexpected financial needs, and it is necessary to cover your hospital bills, treatments, and medication.
These expenses can be managed by maintaining a good credit score. Borrowers can acquire an immediate medical loan from the lender if they maintain excellent credit.
FAQ:
What are the types of secured loans?
A loan comes with collateral and are secured loans such as home loan, vehicle loan and secured credit cards.
What is a secured and unsecured loan?
Secure loans have collateral, which means they are protected by something you own that the lender may seize if you fail to repay the loan. Unsecured loans always come with no collateral.
What type of loan is cheapest?
Secure loans can be considered an affordable choice because they have collateral and a low interest rate.
How to get a loan with no credit?
Yes, Zap Money offers immediate personal loans up to 3000 for people with no credit by simply installing the Zap Money app on the Play Store and registering it.
What is an unsecured loan example?
Unsecure loans come with no collateral such as student loan, personal loan and credit cards are example for unsecured loans
