Life won’t be called life without problems. Problems come in many forms, whether family problems, financial problems, business problems, etc. You can never avoid them, but the good thing is that there is always a solution for every problem. If you have financial problems, you can always ask for help from your friends. However, if no one can help you yet, you can always apply for a loan.
The same with problems, loans also come from different types depending on what you need. If you need cash, you can apply for personal loans. On the other hand, if you need a new car, you can always apply for an auto loan. This is proof that for every problem, there is always a solution. You just have to look for one. With that in mind, here are the types of loans you can apply for, depending on what you need right now.
Secured Loans
Secured loans are loans that require the borrower to have something as collateral. For example, if you apply for motorcycle loans, sometimes the motorcycle can be the collateral itself. If you don’t want your motorcycle as the collateral, you can choose any high-value property so your loan will be approved. Besides, interest rates are usually lower in a secured loan and don’t require a good credit score.
However, if you don’t want to have collateral at all, there is still a chance that you get approved. But the interest rates are higher, and it requires a good credit score. This is because lenders don’t have something in case you can’t pay your loan; they impose higher interest rates to ensure that they get their money back quickly every time you pay.
Unsecured Loans
In contrast to secured loans, unsecured loans don’t require collateral. As we’ve mentioned in the second paragraph of the secured loan section, this type of loan imposes a higher interest rate and requires a good credit score. In addition, the common types of unsecured loans are personal loans, credit cards, and student loans.
You can apply for a personal loan when you have major upgrades in your house or even pay medical expenses just in case your savings are exhausted. Regarding credit cards, if your credit card’s interest is much higher than the interest when you apply for a personal loan, it would be best to apply for a personal loan and pay all your credit card debts to have savings. Lastly, the common rule for student loans is to “study now, pay later” with no interest.
Cash Advance Loans
When there are emergencies that require cash, cash advance loans are your best option. This is one of the most common loans available since you can apply for it even in your office. This is usually done with two parties: you, the borrower, and your employer, the lender. The terms and approval would depend on your paycheck.
Generally, this type of loan has a higher interest rate since it is intended only for short-term borrowing. In addition, this loan doesn’t require any collateral since usually, it is just between the employer and their employees, meaning trust is already established. Lastly, the options for paying the loan are convenient for you since you can just opt to deduct it from your payslip or deduct it directly from your bank account.
Pawnshop Loans
One of the most common and fastest cash borrowing options you can apply for is a pawnshop loan. This is common because it is almost always present in local areas. The nature of this loan is you take out an item of yours like jewelry and give it to them for you to borrow money.
Although the nature of this loan is like secured loans, and your item will serve as collateral, the interest rate of this loan is high. Plus, once your loan is approved, you will really need to pay them back in the time given because they could sell your items if otherwise. You may also be charged with other fees like insurance and the cost for storage if it is overdue.
Title Loans
If you own land, a car, or any property with a title, you may apply for a title loan. However, keep in mind to apply only for this loan if there is no other option. Treat this as your last resort. Why? Because the collateral of this loan is not just any low amount properties, but those properties like house, land, and car, which have a substantial monetary value.
In addition to making this loan your last option, this loan usually lets you borrow 25% to 50% of the amount of the property put in collateral, and they only give you 15 to 30 days to pay back what you owed. Meaning it would be difficult for some to pay it in the period given. Not to mention this loan has higher APRs. Lastly, if you can’t pay them back, your property will be repossessed. So when you apply for this loan, think a hundred times.
Takeaways
Whether what loan you apply for in the future, always consider first if you need it. If the case is an emergency, then there’s no excuse that you need to apply for a loan. And when you apply for a loan, know what’s best for your situation. With that said, you can always refer to the examples and types of loans mentioned above.