If you have not been borrowing money, you may need to do it in the near future. Borrowing of money will most likely come in the form of loan and understanding which type of loan is suitable for you is essential. There are many different types of loan and each will suit different people with different situation.
The following are a few questions you need to ask yourself before deciding which type of loan is suitable for you.
- How Much Do You Wish To Borrow?
- How Much Equity Do You Have?
- How Long Do You Intend To Borrow Your Money For?
Type 1: PayDay Loan
For any loan amount below $1,000, you should consider taking a payday loan. A payday loan works like you take out a set amount of money and repay back within a month, which is usually on your next payday. Interest rates for payday loans are usually set at 25% so you should honestly speaking, consider other types of loan, or drop the idea of getting a loan.
Type 2: Unsecured Loan
A Personal Loan would suit you best if you want to borrow anything between $1,000 to $25,000. A personal loan is also known as an unsecured loan as it does not have any collateral against them, such as your home, or any of your valuable possession or asset. Since there is no collateral involved, the interest rates are usually higher for personal loan.
Type 3: Secured Loan
When you need a loan above $25,000, it is highly recommended that you should go for a secured loan. This is where you borrow a set amount of money and use your house or asset as collateral, failing to make repayment will result in your house or asset being repossessed by your loaning company. The interest rate will be lower for this type of loan since you are providing your asset as collateral.
I spend some time to write this article because I realize a number of people out there still do not understand what type of loan should they take based on their situation.
My previous article on “What Are Secured And Unsecured Loans?” will explain more about secured and unsecured loans in details.
January 17th, 2009 at 11:40 pm
I am amazed with it. It is a good thing for my research. Thanks
February 13th, 2009 at 7:16 am
It is best to go to a legal finance expert and have everything of your finances reviewed before taking the plunge.
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