At some point in our lives, you’re going to need some type of credit. It could be for your new home, car or for that dream vacation you’ve been looking forward too. Regardless of the reason for the loan, you need to know the credit options available to you.
When you’re beginning your credit journey, it’s not always easy to find the perfect loan or find a lender that will award a loan. We’ll go over some of the most popular types of credit available and how they work.
It’s not impossible to find a loan for your needs if you research and take your time to decide.
Start Your Credit Options with a Secured Loan
The most common type of loan available is the secured loan. This runs the gambit from a car loan and home loans and any other loans that require the use of collateral in order to qualify for it. For example, when you try for a home loan, the home itself is the security for the loan.
It decreases the bank’s risk because if you default on the loan, they can take the collateral property. It’s the same for a car, where if you default, then the bank can repossess the car legally.
If you have bad credit, then you can offset the bank’s risk by providing security for the loan through collateral or such as a down payment. These kinds of loans are available through lenders such as Bonsai Finance.
Home Equity Loans Provide Flexible Money
When you get a mortgage, the banks own the property and you make payments until the loan is repaid. As you make payments, you begin to own a percentage of the property, this is the equity. If you need a loan for an emergency or for home repairs, then you can use that equity.
A home equity loan is a straight forward loan where you use the equity in your home as collateral. The bank gives you a set amount with an interest rate. You pay it back with set payments over time.
A home equity line of credit is similar in that your home equity is used as the basis for the line of credit. Instead of a set loan, you’re given a certain amount that you can access at any time. For example, if you have a line of credit for $10,000 and you want to go on vacation, then you can take $2,000 for the vacation and pay it back over time.
It’s like a credit card that uses your home equity as security.
Payday Loans for Short Term Needs
Most people think loans need to be large sums of money, but that’s not true. If you need a few hundred dollars for an emergency such as a car payment, then you can get a payday loan.
These are short term loans that go from one paycheck to the next and often are high interest. Unlike a traditional loan that you pay back over time, a payday loan is paid back in a single payment.
It’s important to make the payment because the high-interest rate can make it difficult if it goes beyond the payment date.
There Are Loan Options for You
These are some of the most popular credit options available to you. It’s important to find not only a loan that works for you but at an interest rate and payment schedule that works as well. Shop around for a good deal.
If you want more information about loans, then explore our site.